German bond yields edge lower after Trump team attacks Powell

LONDON, Jan 12 (Reuters) -

German government bond yields edged lower in early trading on Monday, in contrast with U.S. Treasury yields, which rose after the Trump administration threatened

Chair Jerome Powell

with a criminal indictment, again unnerving investors over the independence of the world's ?most powerful central bank.

On Sunday, Powell said the Fed received subpoenas from the Department of Justice ?related to remarks he made to Congress last summer about cost ?overruns for a $2.5 billion renovation project at the Fed's headquarters ?in Washington.

German 10-year ?yields, which last week fell by the most since October, reversed a very early rise ?and were last modestly lower on the ?day at 2.821%. Two-year Schatz yields were flat at 2.1%.

Another attack on the Fed has few implications, if any, for ?how the European Central Bank ?conducts monetary ?policy. But the news dealt a blow to investor confidence and added to concerns about the reliability of the U.S. as an investment destination, ?funnelling more capital into markets like Europe.

"Concerns about Federal Reserve independence have resurfaced amid an intensifying Trump-Fed feud, adding another layer of uncertainty to the rates outlook and risk sentiment," Saxo Bank chief investment strategist Charu Chanana said in a note.

Meanwhile, U.S. 10-year Treasury note yields were ?up ?1.4 bps at 4.185%, while those on 30-year bonds , which tend to reflect investor sentiment towards long-term government finances, rose 3.2 ?bps to 4.851%.

Last week's data releases painted a picture of a U.S. economy that continues to generate jobs with moderating inflation, meaning there could be little room for the aggressive rate cuts President Donald Trump wants from the Fed. At present, market participants expect no cuts until June, a view that Sunday's developments did ?not alter.

Within the euro zone, Italian and French 10-year yields were up nearly 2 bps each at 3.477% and 3.544%, respectively.

This week is expected to bring more bond ?issuances from Germany, Austria and Italy. (Reporting by Amanda Cooper; Editing by Thomas Derpinghaus)