Wires

Euro zone bond yields rise as stellar year for market draws to close

Dhara Ranasinghe

(There will be no London-based euro zone bond market report on Dec. 31 due to the New Year's Eve holiday)

* Euro zone periphery govt bond yields http://tmsnrt.rs/2ii2Bqr

LONDON, Dec 30 (Reuters) - Euro zone bond yields rose across the board on Monday, as a rally in world stock markets reduced demand for safe-haven assets, as a stellar year for the market drew to a close.

Trading remained thin before the New Year's holidays and was not expected to pick up until next week.

In early trade, most 10-year bond yields were two basis points higher on the day. Germany's Bund yield was at -0.23% , heading back towards recent six-month highs.

The mild selloff in bond markets came as world stocks looked set to end the year on strong note amid optimism over global growth and U.S.-China trade relations.

China's central bank announced a measure that would help lower borrowing costs and boost economic growth. China also forecast its retail sales grew by 8% in 2019 .

Still, after a year that saw investors flock to safe-haven bond markets as a bitter trade war escalated, the economic outlook deteriorated. Major central banks weighed in with easing and bond yields remained below their level at the end of 2018.

German, Dutch, and French 10-year bond yields are all poised for their biggest annual declines in five years , having tumbled 50 to 65 basis points.

Elsewhere, Italian Prime Minister Giuseppe Conte at the weekend outlined an ambitious agenda for next year, including reform of the justice system and state bureaucracy.

Italy, with the agreement of the European Union Commission, will also delay to early 2020 the presentation of a plan to sell its stake in Monte dei Paschi di Siena, the Treasury said on Sunday, as the bank struggles to shed bad loans.

The Italian/German 10-year bond yield gap briefly dipped to 159 bps, its tightest in just over a week.

(Reporting by Dhara Ranasinghe, editing by Larry King)