Euro zone bond markets calm as inflation surges past ECB target

LONDON, June 1 (Reuters): Most euro zone government bond markets were broadly steady on Tuesday, looking past a surge in inflation in the currency bloc to the likelihood that hefty monetary stimulus will remain in place for some time.

Italy's 10-year bond yield reached a three-week low in a sign markets were confident the European Central Bank will not decide to slow the pace of bond buys when it meets on June 10.

Data showed inflation in the 19 countries sharing the euro rose to 2 per cent in May from 1.6 per cent in April, driven by higher energy costs to its fastest rate since late 2018 and above the ECB's aim of "below but close to 2 per cent".

In addition, IHS Markit's final Manufacturing Purchasing Managers' Index (PMI) rose to 63.1 in May from April's 62.9, above an initial 62.8 "flash" estimate and the highest reading since the survey began in June 1997.