Bund yields set for weekly drop, gap with US Treasuries at lowest since April

By Stefano Rebaudo

Nov 28 (Reuters) - Euro zone benchmark Bund yields were set for a second straight weekly decline, tracking U.S. Treasuries after the shutdown ended and fresh U.S. economic data hit the market.

German bond yields fell more modestly than their U.S. counterparts, with the gap between 10-year Treasuries and Bunds narrowing to its lowest since April late Wednesday.

On April 2, U.S. President Donald Trump announced trade duties on major partners, triggering a sharp sell-off across U.S. assets, including government bonds.

Germany's 10-year yields, the euro area's benchmark, was up 0.5 basis points (bps) and on track for a weekly 2-bps drop. Benchmark 10-year U.S. Treasuries yields were up 2 bps at 4.02% after falling for five straight sessions as data reinforced expectations the Federal Reserve will cut interest rates next month.

The yield spread between U.S. and German 10-year borrowing costs was at 132.50 bps after hitting 131.96 bps earlier this week, its lowest level since April 7.

Germany's 2-year yields, more sensitive to expectations for European Central Bank policy rate outlook, rose 0.5 bps to 2.03%. It hit 2.051% last week, its highest level since March 28.

Italy's 10-year government bond yield were up 0.5 bps at 3.41%. (Reporting by Stefano Rebaudo; editing by Andrew Heavens)