Euro zone bond yields creep up on firm data, ECB minutes loom

LONDON: Another flurry of upbeat economic data pushed most bond yields in the euro area slightly higher on Thursday, before the release of minutes from the European Central Bank's October meeting when the bank laid out its plans for asset purchases next year.

Surveys covering the services and manufacturing industries in the euro zone outshone even the most optimistic forecasters in Reuters polls - indicating growth is broad-based - with factories having the second-best month in the index's history .

Focus also turned to the release of the minutes from the ECB's Oct. 26 meeting, given discussion among central bank officials this week about changes in communication next year.

Benoit Coeure, the ECB director in charge of its market operations, told a German newspaper this week he expects the ECB to drop by next September a pledge to continue buying bonds until inflation heads towards its near 2-percent target .

That was followed on Wednesday by a source-based story from Reuters that said rate-setters hope to put off debate on new moves until well into next year.

"What has materialised this week is how the debate is going to change in the future," said Peter Chatwell, head of euro rates strategy at Mizuho.

"The most important information to come from the accounts will be the degree of support there was for keeping QE open- ended by saying that it can be done beyond September."

After buying 2.2 trillion euros ($2.59 trillion) worth of bonds since March 2015, the ECB decided in October to halve its monthly purchases to 30 billion euros from January.

That reflected the euro zone's best economic performance in a decade. But the ECB has also extended the scheme by nine months, since inflation is still barely rising.

The extension went down well with bond markets, where borrowing costs have been underpinned by ECB bond-buying.

Since the Oct. 26 ECB meeting, bond yields across the euro area have fallen 10 to 40 basis points, with the biggest falls coming in Portugal.

Strong purchasing mangers surveys on Thursday put some upward pressure on bond yields, although the US Thanksgiving holiday kept trade generally subdued.

Yields in peripheral countries such as Italy were roughly 2 basis points higher on the day. Germany's 10-year bond yield was steady at 0.35 percent -- up from two-week lows hit earlier this week around 0.33 percent.