Euro zone bond yields rise as Japan growth smashes forecasts

Euro zone government bond yields rose 3-4 basis points across the board on Monday, bouncing from recent lows following stronger-than-expected Japanese growth.

Japan's economy expanded at the fastest pace in more than two years in the second quarter as consumer and company spending picked up, highlighting a long-awaited bounce in domestic demand.

The data further supports expectations that the global economy is on the mend and that central banks can start to unwind extraordinary monetary stimulus put in place in the wake of a series of financial and debt crises.

And even though data showed Monday that industrial output in the euro zone fell more than expected from the previous month, it still increased by 2.6 percent on an annual basis.

The yield on Germany's 10-year government bond , the benchmark for the euro zone, was up 4 bps to 0.42 percent, a move mirrored by most other high-grade euro zone 10-year government debt.

Japanese 10-year debt itself was flat on the day while 10-year U.S. Treasury yields were also up 4 bps.

"The question becomes how Japanese growth could impact the very expansionary stance of central banks," said DZ Bank strategist Daniel Lenz.

"With Fed and ECB minutes coming up and a speech from (Bundesbank member) Andreas Dombret, we may find out more this week."