UPDATE 1-Euro zone bond yields higher as German business sentiment hits 2-1/2 year highs

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Updates with Ifo)

LONDON, June 24 (Reuters) – Government bond yields in the euro area drifted higher on Thursday, with news that German business morale is at its highest in 2-1/2 years adding to brightening prospects for the region’s economy.

The Ifo institute said its business climate index hit its highest level since November 2018 on companies’ surging optimism about the second half of the year in Europe’s largest economy.

On Wednesday, IHS Markit’s Flash Composite Purchasing Managers’ Index, seen as a good guide to economic health, jumped to 59.2 in June, its highest reading since June 2006.

Analysts expect signs of a strengthening economy to keep upward pressure on borrowing costs. Germany’s benchmark 10-year Bund yield rose to -0.17%, up one basis point on the day.

It has risen around 12 basis points from lows hit a day after the European Central Bank’s reaffirmed its dovish policy…

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