ROME: Southern European bond yields fell while German government debt yields rose on Friday as investors focused on central bank policy uncertainty and a jobs data miss in the United States. Focus was on the European Central Bank on Friday, where President Christine Lagarde said the bank may set policy for a relatively short period at this month’s meeting given heightened uncertainty.

She appeared to reiterate ECB sources, which earlier this week told Reuters a growing number of ECB governors are considering delaying part of a decision on whether to end their pandemic emergency bond purchases in March and how much debt to buy thereafter given the uncertain economic outlook.

Southern European bonds outperformed on Friday. Italy’s 10-year yield, which moves inversely with its price, dropped as much as 4 bps to 0.92%, the lowest in nearly two weeks.

That narrowed the closely watched risk premium over German peers to 128 bps, after it widened to November 2020 highs earlier this week at 137 bps. Antoine Bouvet, senior rates strategist at ING, said Friday’s fall in Southern European bond yields may be explained by the market taking Lagarde’s comments as “mildly dovish”, alongside comments from the Bank of England flagging a possible delay to policy tightening.

But, “I think, the delay in long-term (quantitative easing) decision is a false good news for markets. It prolongs the period of uncertainty and the ECB may take a more hawkish decision if it waits for the current wave to be over,” Bouvet said.

Yields however came off the day’s lows following data showing US jobs increased at a far lesser pace than expected in November though the unemployment rate dropped below a Reuters poll to 4.2%, the lowest since February 2020. Germany’s 10-year yield, the benchmark for the euro area, was up 1 basis point at -0.37% following the data, after a sharp fall on Thursday pushed it to the lowest since September.

“The outlook is not really changed that much,” said Peter McCallum, rates strategist at Mizuho, citing the fall in the unemployment rate.

“The market has already priced more hawkish Fed with Powell’s comments this week and we probably keep trending in this direction,” he added. Euro zone money markets have ramped back up bets on a December 2022 rate hike by the ECB following moves in the US They now see around a 90% chance of a 10 basis point hike then, compared to a 50% chance last Friday when the Omicron variant shook markets.