LONDON, Sept 23 (Reuters): Euro zone government bond yields rose on Thursday as the Federal Reserve signalled it would likely begin reducing monthly bond buying as soon as November, Norway lifted rates and a rally in stocks dented the appeal of safe-haven debt.
Business activity data showing input prices in the single-currency bloc at a two-decade high in September added to the upward pressure on yields, pushing prices down.
European Central Bank policymakers are bracing for inflation to exceed the bank's already raised estimates, paving the way for it to end its emergency bond purchases in March, sources involved in the discussion said.
This backdrop pushed up borrowing costs, with 10-year yields up 3-4 basis points across the euro area. In a slightly hawkish tilt, the Fed said on Wednesday it will likely begin reducing its monthly bond purchases as soon as November and signalled interest rate increases may follow more quickly than expected.
"More than anything, it (bond moves) is about the Fed because Jerome Powell was a lot... less ambiguous about the next step," said Daiwa Capital Markets' head of economic research Chris Scicluna, referring to the Fed President.
Germany's 10-year Bund yield was last up 4 bps on the day at -0.29 per cent, heading back toward recent highs.
Stock markets meanwhile rallied, with investors calmed after China injected fresh cash into its financial system ahead of an $83.5 million Evergrande bond coupon deadline that could be the start of one of the world's largest ever corporate defaults.
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