Eurozone government bond yields turned higher on Monday, 9 November, reversing earlier declines as investors pivoted back to the outlook for interest rates ahead of US inflation data due on Tuesday.

Germany's 10-year Bund yield, the benchmark for the eurozone, rose 0.014 percentage points to 3.267 percent, according to Tradeweb data cited by Dow Jones. The US 10-year Treasury yield rose to 4.872 percent, up from Friday's settlement of 4.858 percent.

The move came after yields had edged lower in early trading. In the morning session, the 10-year Bund yield had fallen 1 basis point to 3.24 percent, while the more policy-sensitive two-year yield declined 2 basis points to 2.95 percent, Reuters reported. France's 10-year yield fell 1 basis point to 4.76 percent and Italy's equivalent yield fell 2 basis points to 4.32 percent.

Oil slide steadies, then rate bets take over

The early dip in yields was supported by a sharp fall in oil prices. Brent crude fell about 5 percent to around $93 a barrel after US President Donald Trump said renewed strikes on Iran were highly unlikely while talks to end the conflict continue. Cheaper oil eased fears that energy costs would keep inflation elevated for longer.

Rising European natural gas prices limited the early decline in yields, keeping overall market movements subdued, and by the afternoon the focus had shifted back to central banks. Markets are bracing for the October US consumer price index on Tuesday, which is expected to remain above the Federal Reserve's 2 percent target, keeping the central bank on track to raise interest rates in December.

Investors are also weighing the chance of further rate rises from the European Central Bank. Eurozone inflation accelerated to 4 percent in October from 3.8 percent in September, adding to the case for caution on the pace of any easing.

Four weeks of falling Bund yields

The 10-year Bund yield has fallen for four consecutive weeks, as volatility in equity markets prompted investors to seek the relative safety of government bonds. The benchmark yield climbed to 3.65 percent in late September, its highest level since 2009, amid a global bond sell-off driven by concerns that elevated energy prices could fuel inflation and rising government borrowing needs.

Monday's reversal shows how quickly that safe-haven demand can fade when rate expectations move. Stocks rallied across Europe on the day, with the Stoxx Europe 600 closing 1.26 percent higher at 656.52, as the oil slide and a rebound in risk appetite pulled money away from bonds.

The next test comes quickly. Tuesday's US inflation reading will shape expectations for the Federal Reserve's December meeting, and eurozone growth figures due later in the week will test the case for the European Central Bank's next move. This article is for information only and is not investment advice.