June 19, 2018 / 1:50 PM / in 5 months

Italy govt bond yields rise as trade tensions worsen; 2-year yield up 10 bps

LONDON, June 19 (Reuters) - Italian government bond yields rose across the curve on Tuesday, as investors rushed to buy safer assets such as German debt amid a rise in trade tensions between the United States and China.

Italian yields remain well below the recent highs hit before the formation of a coalition government but two-year yields jumped by around 10 basis points to a high of 0.66 percent, rising off three-week lows hit on Monday, according to Thomson Reuters data.

Ten-year yields rose about five bps to above 2.6 percent .

“We’ve got a general risk-off tone, so I think it’s just that mood affecting Italian bonds. Stocks are down, and given the recent events in Italy, their bonds are particularly sensitive,” Rabobank strategist Lyn Graham-Taylor, said.

German 10-year yields, meanwhile, fell 3.5 bps.

U.S. President Donald Trump’s threat to impose a 10 percent tariff on $200 billion of Chinese goods and a warning of retaliation from Beijing have led to a selloff in emerging markets, equities and other assets perceived as higher-risk.

The U.S. dollar and high-grade government bonds have benefited. (Reporting by Sujata Rao and Abhinav Ramnarayan Editing by Tommy Wilkes)

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