GERMAN government bond yields jumped on Tuesday after the European Central Bank's non-committal tone in explaining the euro-area monetary policy outlook and more hawkish comments attributed to some of the central bank's policymakers.

       Last Thursday the ECB confirmed plans to end its stimulus scheme in the third quarter, avoiding any firm pledge beyond the end of bond buying.

       Germany's 10-year government bond yield, the benchmark of the bloc, rose 7.5 basis points (bps) to 0.914%, its highest since July 2015 at 0.934%.

       The lack of dovish comments from the ECB's president, Christine Lagarde, have been weighing on bond prices in the euro area.

       "The ECB kept its options open, as expected, but the lack of a pushback against the current levels of German yields implicitly endorses very aggressive rate hike market expectations," Erjon Satko strategist at BofA said.

       The ECB could still raise its interest rates in July, two sources told Reuters last week.

       Investment banks mentioned the ECB's well-known hawk Robert Holzmann calling for 50 bps rate hikes by fall, and Estonia's central bank governor Madis Muller flagging the chance of the bond purchase programme ending in July.

       "There is no longer a question about will they (the ECB) or won't they hike interest rates by the end of the year, I think they will," Francois Savary, chief investment officer at Swiss wealth management firm Prime Partners said.

       A key market gauge of long-term euro zone inflation expectations rose again above 2.40% on Tuesday at its highest in a decade.

       Some analysts argued that U.S. Treasuries have been in the driving seat of the fixed-income market as the ECB's policy of "maximum optionality" has left a vacuum that has been filled by expectations about the Fed's monetary stance.

       U.S. Treasury yields rose, with the 10-year yields rising 2.5 bps, after hitting its highest since December 2018 at 2.909% as investors adjusted for the Federal Reserve aggressively raising rates.

       The yield curve steepened last week after the ECB comments.

       The spread between 2-year and 30-year yields widened to 100.6 on Tuesday, compared with around 80 bps right before last week's ECB meeting.

       The spread between 2-year and 10-year bond yields also widened, to around 83 bps from 66.

       "Steepening is hardly sustainable, particularly with central banks showing zero tolerance on inflation," Commerzbank analysts said in a note to customers.

       Italy's 10-year government bond yield rose 4 bps to 2.5%, after hitting its highest since March 2020 at 2.565%. The spread between German and Italian 10-year yields tightened 2.5 bps to 162.

       The spread between German and French 10-year yields is still below 50 bps, at 45 bps, with analysts waiting for the runoff of the French presidential election due on Sunday.

       Six days before the vote, polls showed President Emmanuel Macron as the likely winner, but with a slim margin, against far-right challenger Marine Le Pen. - Reuters