Euro zone bond yields steady, focus turns to ECB

Germany's two-year bond yield `DE2YT=RR`, which is sensitive to changes in ECB policy expectations, was steady at 2.776% after touching a two-year high of 2.8174% on Monday. Meanwhile Britain's gilts slightly outperformed after PM Burnham's choice of John Healey as finance minister. "The Prime Minister’s surprise pick ... might help at the margin, as he was seen as more market-friendly than most alternatives," said Rob Wood, chief UK economist at Pantheon Macro. Britain's benchmark 10-year gilt yield `GB10YT=RR` was down 1 bp at 5.027%. Bond yields move inversely with prices. (Reporting by Samuel Indyk; Editing by Andrew Heavens) Bond markets have been driven by energy prices in recent weeks, according to Hauke Siemssen, rates strategist at Commerzbank. Energy prices have been rising following military strikes by both the United States and Iran, with maritime traffic through the vital Strait of Hormuz chokepoint effectively shut down. Brent futures touched a five-week high on Monday above $91 per barrel, before dropping below $89 per barrel on Tuesday and then edging up again to $89.70 a barrel. Benchmark Dutch wholesale gas prices `TFMBMc1` rose to their highest intraday level in four months on the same day, adding to worries about inflation and strengthening the case for tighter policy from the ECB. The central bank meets this week and will most likely hold its deposit rate steady at 2.25%, following a rate rise in June. Further ahead, investors were pricing in about 43 basis points of tightening from the ECB by the end of the year, or the equivalent of one quarter-point rate hike and a more than 70% chance of a second. "What the market is pricing in terms of ECB hikes is a lot," said Commerzbank's Siemssen. "A hike in September can be justified with the inflation figures, but then I think the bar will be high for another hike into restrictive territory as they have to keep an eye on growth," he added. LONDON, July 21 (Reuters) - Euro zone government bond yields were steady on Tuesday as Brent crude futures hovered around $89 per barrel, with focus turning to the European Central Bank's policy announcement on Thursday. Investors were also watching Britain's gilt market after new Prime Minister Andy Burnham picked former defence minister John Healey — who was a junior minister in the Treasury from 2002 to 2007 — as his finance minister. Germany's 10-year bond yield `DE10YT=RR` was last up less than 1 basis point (bp) on the day at 3.157%, after earlier hitting its highest level in eight weeks at 3.1666%.

Euro zone bond yields steady, focus turns to ECB

German and UK yields edge lower

Energy prices keep inflation worries in focus

Euro zone bond yields steady ahead of ECB meeting

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