* Italian 10-year highest yield since September 2020
* Bunds are closely monitored for new trends – UniCredit (Recast, add details, update prices)
May 3 (Reuters) – Germany’s bond yield benchmark climbed to its highest since March 2020 and Italian yields to their highest since September on Monday as analysts watch to see if last month’s eurozone government bond selloff has more room to play .
German bonds underperformed in the US Treasury and yields, which move inversely to prices, rose in April.
The selloff picked up last Thursday as German inflation rose further above the European Central Bank’s target, and US data showed the pace of economic growth in the first quarter.
Expectations of higher growth and a resurgence in inflation, first sparked by massive fiscal stimulus in the United States, have pushed government borrowing costs on both sides of the Atlantic higher this year.
Investors are looking for signs that suggest the central bank may start easing the extraordinary monetary stimulus, which is still holding back bond yields.
After calming down on Friday, when month-end buying supported bond prices, the yield on the German 10-year Bund, the benchmark for the region, rose by more than 3 basis points to a new high since March 2020 at -0.162% on Monday.
Italy’s 10-year yield hit a new high since September 2020 at 0.903%.
Arne Petimezas, analyst at AFS Group in Amsterdam, said that while he did not see any specific driver behind Monday’s move, it was in line with expectations.
“Recovery is increasing, vaccinations are accelerating, reopening is imminent,” he said.
Some investors ended April expecting further increases in euro area government bond yields as vaccinations accelerated and UniCredit analysts previously said the Bunds would be monitored “very closely” for any indication of whether last week’s sell-off might be the start of a new trend.
There are also concerns about market jitters ahead of the European Central Bank’s June meeting, where it should review March’s decision to speed up pandemic emergency bond purchases.
The ECB could start phasing out emergency measures as the pace of coronavirus vaccination reaches critical levels and the economy accelerates, said Vice President Luis de Guindos.
Monday’s rise in yields came with German retail sales posting an unexpected spike in March as the easing of some lockdown measures boosted buying. nL8N2MQ0V8]
But April eurozone manufacturing activity data came in slightly below preliminary estimates, although still at the highest level since the survey began in 1997.
Moves also took place in a quiet trading session given the public holidays in London, as well as Japan and China, which could reduce market liquidity and increase movement.
Focus shifts to the United States on Monday, where US ISM manufacturing activity figures scheduled for 1400 GMT are expected to show some growth in April. (Reporting by Yoruk Bahceli; Editing by Subhranshu Sahu and Mark Heinrich)