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* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr (Updates prices)
LONDON, June 10 (Reuters) - Euro zone government bond yields rose on Monday as markets were cheered by the United States' trade agreement with Mexico, though pessimism about global growth has kept yields pinned near multi-year lows.
European shares climbed after the United States on Friday dropped its threat to impose tariffs on Mexico, removing a major sticking point for equity markets. Markets were also boosted by data showing that Chinese exports had risen more than expected, despite higher U.S. tariffs.
Core bond yields in the euro zone were slower to react, but were up around three to eight basis points by the close. After such a strong rally for bonds last week, this meant they were still near all-time lows, but the improved risk appetite marks a shift in sentiment.
Germany's 10-year bond yield rose for the first time in five sessions, and was last up four basis points to -0.215%, while French bond yields rose for the first time in seven sessions. French 30-year bond yields increased almost nine basis points to 1.14%, marking their biggest one-day rise since December 2017.
The move comes on the back of the rise in U.S. Treasuries yields which were up five to six basis points across the curve.
"The markets are trying to reverse the severe price action seen last week after the European Central Bank and U.S. payrolls," said Pooja Kumra, European rates strategist at TD Securities.
"From a policy perspective there is less reason to see bunds going further down but the political situation between the U.S. and China will remain the key driver in the coming weeks," she said.
ECB policymakers are open to cutting the ECB's policy rate again if economic growth weakens in the rest of the year and a strong euro hurts a bloc already bearing the brunt of a global trade war, two sources told Reuters.
Bond yields across the bloc fell to multi-year, if not all- time, lows last week after data showing a sharp slowdown in U.S. non-farm payrolls fuelled speculation of rate cuts by the Federal Reserve.
The weak U.S. data came a day after the ECB ruled out raising interest rates in the next year and even opened the door to cutting them or buying more bonds as risk factors such as the global trade war and Brexit drag the euro zone economy down.
Italy's government bond yields proved volatile on the day with the spread of its 10-year debt over Germany indicating that investors remain concerned about the dispute between Italy's government and the EU over its expansive budget.
Its 10-year bond yield rose six basis points at one stage to 2.43% before retreating to 2.36%, while the Italy/Germany bond yield gap remained wide at around 258 basis points .
"This is not a normal level of spread," said Mizuho's head of rates strategy Peter Chatwell. "There is a lot of fear and Italy is trading quite differently to other European bond markets."
Italian deputy prime minister Matteo Salvini offered more conciliatory comments to the market, saying the government does not want to fight with Europe and that he is open to alternative tools to the "mini-bot" securities to solve the problem of unpaid debt. (Reporting by Virginia Furness; Editing by Ed Osmond and Mark Potter)