LONDON: German 10-year Bund yields fell below 0.10 percent for the first time in almost a year on Tuesday as the biggest fall in the country's factory orders in six months suggested a global slowdown was leaving its mark.
The unexpectedly poor data, accompanied by a downward revision to euro zone business growth, keeps the onus on central bank easing at a time when yields are also being pushed lower by the European Central Bank's ramped-up bond purchase programme.
Strategists said a fall in oil prices to one-month low on an unexpected U.S. demand drop was also weighing on inflation, pushing down yields already under pressure from the data that showed weaker foreign demand for German goods.
"The data signals weaker export growth, softer demand both within the euro zone and (further) abroad and thus suggesting that the ECB's challenge as regards boosting inflation and inflation expectations is and will remain very much an uphill battle," Rabobank strategist Matt Cairns said.
Contracts for 'Made in Germany' goods were down 1.2 percent on the month, the Economy Ministry said, compared with a Reuters consensus forecast for a rise of 0.2 percent.
A final reading of euro zone business growth in March also came in lower than flash estimates on Tuesday, showing only a slight rise from February's 13-month low.
German 10-year yields - the bloc's benchmark - dropped 4 basis points to 0.086 percent, the lowest since late April 2015 and within sight of record lows of 0.05 percent hit that month.
Euro zone shares fell 1.8 percent with Germany's DAX down 2.4 percent.
The ECB's chief economist said on Monday that the bank is prepared to ease monetary policy further if necessary to prevent low inflation in the euro zone from becoming entrenched.
Much of the additional ECB bond buying is expected to be targeted at government debt in the short term as plans to include corporate bonds in the now 80 billion euros a month scheme take effect later this quarter.
There is no consensus that Bund yields could break new lows and turn negative, but such bets are emerging. Some analysts are wary that another sharp sell-off, like the one seen just after lows were struck last year, could occur as Bunds get expensive and liquidity conditions remain poor.
The sharp rise in Greek borrowing costs seen on Monday eased but concerns around its finances remain despite a promise from Prime Minister Alexis Tsipras that the country's first bailout review would be completed by April 22.
Two-year Greek yields held near one-month highs as investors fretted about a leaked transcript supposedly detailing a threat that the IMF might not participate in the country's third bailout programme.
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