LONDON: Top-rated German bond yields bounced off two-week lows on Tuesday as a rush to traditional safe haven assets after attacks in Brussels subsided and investors refocused on signs of business optimism in the bloc.
The European benchmark yield, which moves inversely to prices, fell 4 basis points to 0.18 percent in early trading, after reports of explosions at Brussels airport and a metro station.
But by 1200 GMT, German 10-year yields had edged back up to 0.22 percent, flat on the day.
Like the market reaction to attacks in Paris last November, it proved brief and analysts said data showing rising business and investor morale in the bloc's largest economy Germany was also a factor leading yields higher.
"It is somewhat a limited move, the market, sadly enough, is getting used to it in a way," Natixis' head of strategy Jean-Francois Robin said. "The data is second to the Belgium story but...it is also slightly mitigating the move."
Hawkish comments from several Federal Reserve policymakers on Monday have also been exerting upward pressure on bond yields this week because they raise the prospect of further rate hikes in the United States, the world's largest economy.
Atlanta Fed President Dennis Lockhart said the United States may be in line for a rate hike as soon as April, while Richmond Fed President Jeffrey Lacker said U.S. inflation is likely to accelerate in the coming years and move toward the Fed's 2 percent target.
Yields initially rose in the first minutes of European trading on Tuesday before reports of explosions in Brussels.
Belgium's public broadcaster VRT said a suicide bomber blew himself up at Brussels airport and a further blast tore through a rush-hour metro train shortly afterwards. The death toll was 34, VRT said.
ABN AMRO said "jittery market conditions" led to a slightly higher yield at a 5.7 billion euro auction of Dutch bonds on Tuesday.
Some analysts warned that the attacks could further fragment European politics and endanger a fragile economic recovery.
"These attacks will increase xenophobic and anti-immigration sentiment across the EU, which has already been rising in light of the EU's on-going refugee crisis," Eurasia group said in a note.
"This will in turn put more pressure on incumbent governments and limit their space for policy action to address Europe's multiple crises."
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