* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr
LONDON, Oct 15 (Reuters) - German government bond yields
fell to their lowest since March on Thursday and the risk
premium on Italian bonds saw its biggest daily jump since April
as rising coronavirus cases in Europe raised concern about
further lockdowns that would deal another blow to the struggling
euro zone economy.
France imposed curfews while other European nations are
closing schools, cancelling surgeries and enlisting student
medics as overwhelmed authorities face the nightmare scenario of
a COVID-19 resurgence at the onset of winter.
In the United Kingdom, tighter COVID-19 lockdowns could be
imposed on London and northern England by Prime Minister Boris
Johnson's government on Thursday.
"The prospect of more localised lockdowns would hurt
economic activity when they are already struggling and that is
weighing on the bond markets," said Justin Onuekwusi, portfolio
manager at Legal & General Investment Management.
Developed markets now account for about 30% of new cases,
compared to 25% a month ago, Capital Economics said.
Yields on perceived safe-haven German government bonds for
10-year maturities fell more than 5 bps to -0.637%, the lowest
since mid-March, when markets panicked as the coronavirus
pandemic first spread globally. Yields have fallen nearly 10 bps
Yields on other higher-rated bond markets like France and
Belgium also fell to their lowest levels since March as
authorities prepare to lock down parts of their economies.
A rally in Southern European government debt markets stalled
on Thursday as investors took profits, a day after Italian bond
yields fell to record lows as investors priced in additional
support from the European Central Bank, of which Italy would be
a leading beneficiary.
Italian 10-year bond yields rose as high as 0.747%, the
highest in nearly a week, after the country was among several in
Europe reporting record high daily new infections.
That yanked the spread between German and Italian bonds
wider, to more than 130 bps on Thursday from 119 bps on
Wednesday, in its biggest daily rise since April.
Even before the latest round of restrictions, data this week
showed the European economy was losing steam by the end of the
Other Southern European bond yields rose, but by less than
Italy, with Spain and Portugal's 10-year yields up 3 basis
points on the day.
Spain's government said it would issue debt to compensate
for any potential delay in the approval and disbursement of EU
rescue funds. Member states remain divided over a
scheme that ties access to the money to respecting the rule of
Downbeat comments from U.S. Treasury Secretary Steven
Mnuchin that a stimulus deal was unlikely before the U.S.
election and data showing U.S. jobless claims rise more than
expected provided other reasons for profit-taking. .
In Europe, ECB chief Christine Lagarde said headline
inflation is likely to remain negative over the coming months
before turning positive in early 2021.
(Reporting by Saikat Chatterjee and Yoruk Bahceli; additional
reporting by Dhara Ranasinghe; Editing by John Stonestreet/Mark
Heinrich/Catherine Evans/Alexandra Hudson)