LONDON: German bond yields fell in holiday-thinned trading on Monday, regaining some of the ground lost last week on the anniversary of one of the biggest Bund routs in history.
Retreating oil prices and unconvincing economic data from the euro zone and the world's second largest economy China supported demand for the European benchmark.
But holidays in Europe's financial capital London and across Asia kept trading volumes low. Less than 100,000 Bund future contracts traded by 1030 GMT, a fraction of last week's 750,000 daily average.
Ten-year yields fell 4 basis points to 0.25 percent , steadying after Friday's 6 bps rise which pushed yields to within a whisker of six-week highs.
Bund yields have risen for three consecutive weeks, their worst run since a sell-off a year ago when yields shot from a 0.05 percent record low to over 1 percent in a matter of weeks.
But strategists are not expecting a similar blow-out this time around.
"The initial parallels with the stunning sell-off exactly one year ago cannot be dismissed but we see markets much better protected this time around," Commerzbank strategist Rainer Guntermann said.
Oil prices - which often drive inflation expectations and bond yields - retreated from 2016 highs on Monday as rising production in the Middle East outweighed a decline in U.S. output and a sliding dollar.
The challenging outlook for global growth also supported demand for safe haven Bunds.
Data showed euro zone factories did slightly better in April, with output not losing as much momentum as initially thought but growth in activity remained weak despite the second-deepest price-cutting since early 2010.
That came on top of a survey on Sunday showing that activity in China's manufacturing sector expanded only marginally, raising doubts about the sustainability of a recent pick-up in the economy.
Of the other readings due Monday, investors will be closely watching manufacturing data from the United States which could firm support for an interest rate rise next month.
Dallas Federal Reserve President Robert Kaplan said he could back a rise in rates as soon as June or July if U.S. economic data firms up as he expects, comments that triggered selling in bonds on Friday and pushed yields higher.
"The only stimuli that could move the markets are likely to come from the ISM tracking the US manufacturing sector, due out in the afternoon: we see this consolidating in the wake of the marked brightening in sentiment noted in the previous month," DZ Bank strategist Ren? Albrecht said.
Elsewhere, Portuguese yields fell 6 basis points to 2.96 percent after rating agency DBRS maintained the country's only investment grade rating on Friday, ensuring that its bonds remain eligible for European Central Bank bond buying.
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