* Euro zone periphery govt bond yields tmsnrt.rs\/2ii2Bqr (Adds details, context, updates prices)<\/p>\n
MILAN, Feb 8 (Reuters) – Germany\u2019s 10-year bond yields hit a five-month high on Monday on a more upbeat tone in world markets, while Italy\u2019s 10-year bond yield hovered close to one-month lows thanks to brighter prospects for a future government led by Mario Draghi.<\/p>\n
Hopes that a $1.9 trillion aid package will be passed in the U.S. as soon as this month, boosting growth and inflation, put upward pressure on core bond yields, especially in Germany, as a selloff in U.S. Treasuries gathered pace.<\/p>\n
Germany\u2019s 10-year bond yield was last up 2 bps on the day at -0.420%, having touched its highest level since early September at -0.412% in early trade.<\/p>\n
Italy, which last week saw the biggest weekly fall in 10-year bond yields in months, remained in focus in the euro area.<\/p>\n
While Draghi\u2019s route to power is still unclear, signs of support for the previous head of the European Central Bank from some of Italy\u2019s biggest parties – the anti-establishment 5-Star Movement and rightist League as well – underpinned Italy\u2019s bonds.<\/p>\n
Its 10-year bond yield was slightly down at 0.533% , not far from the almost one-month lows hit on Friday.<\/p>\n
Currently, the yield is just 6 basis points away from record lows hit late last year at 0.472%. The gap over benchmark 10-year Bund yields was around 95 bps — close to its tightest levels in five years.<\/p>\n
The strong performance of Italian bonds in the past week could encourage the country\u2019s Treasury to launch new syndicated deals in the near future, UniCredit analysts said in a note.<\/p>\n
\u201cWe continue to expect a deal in the 30-year area, with the Treasury either issuing a new benchmark or reopening BTP 1.7% Sep51 via syndication. As an alternative, Italy might also consider to issue a new 50-year BTP,\u201d the bank wrote in a note.<\/p>\n
ING also said syndicated sovereign bond deals could still come in the week head including from Spain and Italy.<\/p>\n
Italy\u2019s Treasury is due to announce later in the day the details of its BTP auction due on Thursday.<\/p>\n
In Germany, industrial output stagnated in December in the wake of lockdowns, data showed on Monday.<\/p>\n
\u201cStagnation in December increases the risk that industrial production will not be able to save the economy from contraction in the first quarter,\u201d wrote ING in a report.<\/p>\n
Lockdowns weighed on euro zone investor morale, which unexpectedly fell in February, a survey showed on Monday.<\/p>\n
ECB President Christine Lagarde is due to speak before the European Parliament later in the day.<\/p>\n