* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
LONDON, June 17 (Reuters) - Government bond yields in the euro area edged up on Wednesday, ahead of a 5 billion euro ($5.64 billion) sale of new 10-year bonds from benchmark issuer Germany.
Bond markets have been pulled between competing forces, brighter economic data such as Tuesday’s U.S. retail sales data on the one hand and on the other, concern about a second-wave of the coronavirus and further signs of central bank support that has helped underpin demand for fixed income.
“The tension between better economic data and rising COVID-19 cases continues to drive market volatility,” said Antoine Bouvet, senior rates strategist at ING in London.
A full U.S. economic recovery will not occur until Americans are sure that the coronavirus has been brought under control, Federal Reserve Chair Jerome Powell said on Tuesday in the first of two days of hearings before U.S. lawmakers.
“Markets see the glass half full, thanks to central bank support,” Bouvet added.
Most 10-year euro zone yields were 1-2 basis points higher ahead of the auction of new 10-year German government bonds.
“We expect investor demand to be robust considering the current uncertain backdrop, and with a reasonable pullback in yields yesterday,” analysts at Mizuho said in a note.
Germany’s benchmark 10-year Bund yield edged up to -0.41% , holding above three-week lows hit on Monday at -0.47%. Italy’s 10-year bond yield was 1.5 bps higher on the day at 1.38%.
German Finance Minister Olaf Scholz is expected to present a supplementary budget later on Wednesday that pushes up new debt to a record 218.5 billion euros this year - equal to about 6.5% of German output. ($1 = 0.8866 euros) (Reporting by Dhara Ranasinghe; Editing by Alexander Smith)