Bund yields hit fresh one-month high in thin holiday trading

By Stefano Rebaudo

Dec 27 (Reuters) - Euro area benchmark Bund yields rose to a fresh one-month high on Friday in thin holiday trading with investors watching moves in U.S. Treasuries.

The yield on the benchmark U.S. Treasury note edged up after paring earlier gains the day before following a strong seven-year note auction.

Euro area borrowing costs rose on Monday before Christmas although European Central Bank (ECB) President Christine Lagarde said the euro zone was getting "very close" to reaching the central bank's medium-term inflation goal.

Germany's 10-year bond yield, the benchmark for the euro zone bloc, was up 2 basis points (bps) at 2.346%, its highest since Nov. 21.

Money markets priced in a European Central Bank deposit facility rate at 1.83% in July 2025, in line with the levels seen last week.

Germany's 2-year yield, more sensitive to expectations for ECB policy rates, dropped 0.5 bps to 2.059%.

The yield spread between French government bonds and safe-haven Bunds - a gauge of the risk premium investors demand to hold French debt - rose to 82 bps. It recently hit its highest in over 12 years at around 90 bps on worries that the new government will not be able to curb a rising fiscal deficit.

Italy's 10-year yield, the benchmark for the euro area's periphery, rose 1.5 bps to 3.51%, with the yield gap between BTPs and Bunds at 116 bps.

(Reporting by Stefano Rebaudo, editing by Sharon Singleton)