LONDON, Feb 21 (Reuters) - Euro zone bond yields climbed sharply in the afternoon trading session on Wednesday, as investors looked ahead to the release of the Federal Reserve's January meeting minutes and survey data due on Thursday.
Germany's 10-year bond yield hit its highest since Dec. 1 at 2.477%, up 7 basis points (bps). Yields move inversely to prices.
The policy-sensitive two-year yield also rose to its highest in just under three months at 2.871%, up 6 bps.
Bond strategists and investors said the reason for the fall was unclear, given that there was no notable economic data or European Central Bank speeches on Wednesday afternoon, which typically move bond markets. U.S. bond markets were relatively placid by comparison.
Max Kitson, European rates strategist at Barclays said investors could be trimming their bond holdings before the Fed minutes and the latest survey-based purchasing managers' index data for the euro zone, due on Thursday morning.
"In terms of data flow it's been pretty light, so there isn't an obvious data catalyst for European (bonds) to be underperforming… It would seem that it’s just positioning adjustment in some shape or form," he said. "We have the PMIs scheduled for tomorrow and we could see some improvement in those."
Italy's 10-year bond came under particular pressure , with the yield rising 8 bps to 3.953%. The two-year yield jumped 8 bps to 3.44%.
The Fed minutes are likely to repeat central bankers' recent message that they are in no rush to cut interest rates. The Fed left its target range for the Fed funds rate unchanged at 5.25% to 5.5% at its January meeting, while dropping its bias to tighten policy.
A slight majority of economists surveyed by Reuters expect the Fed to begin cutting interest rates at its June gathering.
Bond yields have risen this year as investors have reconsidered their expectations that central banks will cut interest rates sharply this year, as price pressures have stayed a touch stronger than expected and officials have continued to talk tough on inflation.
For the ECB, investors were expecting about 102 bps of easing this year, or around four 25 bp moves, down from around 110 bps on Tuesday. (Reporting by Harry Robertson and Samuel Indyk Editing by Peter Graff and Josie Kao)
