LONDON, April 21 ― A respite for battered euro zone government bonds proved short-lived with yields heading back towards multi-year highs today, with debt markets unable to shake off the hawkish policy signals coming from central bankers.

The premium investors demand to hold French debt over safer German Bunds was stable after French President Emmanuel Macron cleared a major hurdle ahead of Sunday's runoff election with a combative TV debate performance against far-right candidate Marine Le Pen.

In early trade, most 10-year bond yields across the currency bloc were rising sharply again with Italian yields hitting their highest since March 2020 at around 2.61 per cent.

A drip-feed of hawkish comments from European Central Bank officials kept the spotlight on tighter monetary policy to contain inflation, a bearish backdrop for bond markets.

Belgian central bank Governor Pierre Wunsch said policy rates could turn positive this year, according to media reports today.

That followed comments from ECB Governing Council member Martins Kazaks yesterday raising the possibility of a hike as early as July.

ECB President Christine Lagarde and Fed Chair Jerome Powell are due to speak in a debate on the global economy later on.

Germany's benchmark 10-year Bund yield was up almost 5 basis points on the day at 0.91 per cent, heading back towards roughly seven-year peaks. It is up almost 37 bps this month and has risen for five straight months.

While European and US sovereign bond yields fell yesterday as recent heavy selling appeared to entice some buyers back into beaten-down bond markets, the upward pull on yields appeared too strong to resist

"We doubt that the small relief rally will have legs with euro (rates) lift-off in July becoming more likely,” said Hauke Siemssen, rates strategist at Commerzbank. "We thus stick with our cautious stance on duration for today.”

French 10-year yields rose 3.5 bps to 1.38 per cent but fared better than most peers after Wednesday's French election debate. That kept the gap over top-rated German peers at around 46 bps, not far off its tightest level in over two weeks.

With the deciding presidential vote just four days away, some 59 per cent of viewers found Macron to have been the most convincing in the debate, according to a snap poll for BFM TV.

That suggested the almost three-hour showdown would not alter the course of the election, with Macron ahead in previous polls. ― Reuters