LONDON: German government bond yields fell on Monday, reversing an early rise, as the price of oil struck new lows.
Oil fell for a seventh straight session, with US crude prices below $35 for the first time since early 2009, on growing fears that the global oil glut would worsen in the months to come in a pricing war between key producers.
The fall in the oil price has fueled a view that the European Central Bank will struggle to boost inflation in the euro area, bolstering the case for further monetary easing.
"Crude is at such an extreme in price and because inflation in the euro zone is also at such a low level it is completely dominating the market at the moment," Peter Chatwell, head of rates strategy at Mizuho, said.
Inflation in the euro zone is running at 0.1 percent year-on-year rate.
German benchmark 10-year yields initially rose on Monday to 0.58 percent as investors lightened up positions at the start of a week which could see the first Federal Reserve rate hike in nearly a decade.
By 1230 GMT, the yield was down marginally on the day at 0.54 percent.
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