LONDON: Safe-haven German bond yields fell to their lowest level in more than two weeks on Monday as focus turned from central banks to the looming televised debate between the U.S. presidential candidates.
Polls indicate a tightening race between Democrat Hillary Clinton and Republican Donald Trump in a vote shaping up as a major risk event for financial markets.
"We are heading into the presidential debate with a positive bias in European bond markets," said KBC strategist Piet Lammens. "The U.S. debate is positive from a safe-haven stance but it could also be negative if the candidates point to a more aggressive fiscal stance."
Bund yields fell 2.4 basis points to minus 0.10 percent , their lowest level in more than two weeks. They closed on Friday with their biggest weekly falls since late July.
Other euro zone bond yields were about 2 bps lower on the day.
Analysts said Monday's presidential debate could push U.S. bond yields higher if the candidates hinted at more expenditure or tax cuts, which would increase the federal deficit and borrowing.
"Bond markets are likely to view any Trump gains in this debate as putting upward pressure on yields as his fiscal plans are more aggressive," said Martin Van Vliet, senior rates strategist at ING.
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