* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Dhara Ranasinghe
LONDON, Feb 6 (Reuters) - Germany’s benchmark 10-year Bund yield rose to its highest level in almost two weeks on Thursday after news that China will halve tariffs on some U.S. imports boosted hopes the world economy may be able to avoid a major shock from the coronavirus outbreak.
Comments from European Central Bank President Christine Lagarde that the euro zone economy is stabilising put more upward pressure on bond yields.
Yields across the euro area rose on Wednesday on expectation that the virus outbreak in China could be contained and that a cure could be found.
World risk appetite got an additional boost on Thursday after China said it would halve additional tariffs levied against 1,717 U.S. products last year.
That reciprocates a U.S. commitment under a recently signed trade deal between the United States and China, but analysts also saw it as a move by Beijing to boost confidence amid the virus outbreak, which has hurt the economy and investor sentiment.
Germany’s Bund yield rose almost 3 basis points to -0.342%, its highest level in almost two weeks.
Data showed German industrial orders unexpectedly fell in December on weaker demand from other euro zone countries, suggesting that a manufacturing slump would continue to hamper overall growth in Europe’s largest economy.
After falling 26 bps in January as coronavirus fears gripped markets, Bund yields are up almost 9 bps this week and set for their biggest weekly jump since November.
Across the euro area, 10-year bond yields were 2 to 3 basis points higher on the day.
“The tariff news adds to the risk-on sentiment,” said DZ Bank rates strategist Rene Albrecht. “The spill over from coronavirus has not been seen in the West yet, so it doesn’t look like it’s spreading too much and economic performance shouldn’t drop significantly going forward.”
The economic impact of China’s coronavirus outbreak may be temporary, limiting the need for policy action, European Central Bank executives said on Wednesday.
Euro zone growth remains modest, but there are signs of stabilisation, the ECB’s Lagarde told the European Parliament’s committee on economic affairs on Thursday.
Elsewhere, both France and Spain are set to hold bond auctions, which analysts said should go well given falling bond prices in recent days.
Reporting by Dhara Ranasinghe, editing by Larry King