* German 10-year Bund yield rises to -0.39%

* Coronavirus headlines dominate

* Eurogroup meeting in focus

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Updates prices, adds ECB purchase data, Irish and Cypriot bonds)

By Dhara Ranasinghe

LONDON, April 6 (Reuters) – Germany’s 10-year bond yields rose to their highest in just over a week on Monday, reflecting a slightly brighter tone in world markets as the death toll from the coronavirus slowed across major European countries including France and Italy.

But the selloff was modest, reflecting heightened uncertainty triggered by the virus outbreak and the significant damage being inflicted on the economy.

Italy reported its lowest daily COVID-19 death toll for more than two weeks on Sunday, while France’s daily death count also fell in the past 24 hours.

In Spain, which has the second-highest coronavirus death toll in the world after Italy, the pace of deaths slowed again on Monday.

“With aggressive policies of social distancing and testing (and good healthcare systems), there is light at the end of the tunnel,” said Erik Nielsen, group chief economist at UniCredit, said in a note.

“But now the bad news: it’s still a long tunnel.”

Analysts note that the United States and Britain are still yet to see a peak in terms of coronavirus cases, while countries in Asia that had successfully managed to control the first stage of the virus outbreak are now battling a second wave.

The toll the lockdowns will have on economic growth globally, alongside massive central bank easing, suggested bond yields would remain low for some time, they said.


The European Central Bank bought a record 34 billion euros of debt last week in its bid to put a lid on borrowing costs.

Italian bond accounted for 35% of the ECB’s public sector bond purchases in March, well above the amount indicated by the country’s shareholding in the bank. Bonds from Germany, the bloc’s largest economy, accounted for only 6%.

On the data front, orders for German-made goods dropped 1.4% in February, as a sharp fall in orders from abroad hinted at the likely impact of the coronavirus on the exporting powerhouse’s economic prospects.

Investor morale in the euro zone, meanwhile, fell to an all-time low in April, the Sentix survey showed.

Germany’s benchmark 10-year bond yield rose to as high as -0.39%, its highest in just over a week, but far below recent 10-month highs at -0.14%. It was up 2 basis points in late trade at -0.42%.

Italian bond yields were down 4 basis points in late trade at 1.51%, in line with gains in risk assets such as stocks. They had risen in earlier trade, with analysts citing likely unease ahead of a Eurogroup conference on Tuesday.

Euro zone finance ministers should have an open discussion on so-called ‘coronabonds’ as a tool to combat the economic damage, their chairman Mario Centeno said at the weekend.

“While virus hopes support risk sentiment, the periphery should be held back by still low odds for coronabonds and ratings already start weakening,” said Commerzbank rates strategist Rainer Guntermann.

In primary issuance, Ireland and Cyprus hired banks for bond sales expected imminently.

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