NEW YORK: US government debt yields fell on Thursday before a $16 billion auction of 30-year bonds as disappointing euro zone economic data sent 10-year German yields to record lows and raised the appeal of Treasuries.
US yields rose in Asian trading before falling with their German counterparts in reaction to data that showed euro zone growth unexpectedly flatlined in the second quarter and inflation figures that confirmed anemic price growth in the 18-nation block.
Fears about Russia's aid convoy to eastern Ukraine, which Kiev and the West reckon could be a pretext for Russian President Vladimir Putin's invasion into that area, intensified demand for lower-risk US and German government debt, helping to push 10-year Bund yield below 1 percent for the first time ever.
"These events are pushing German and global yields lower," said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh. "Some of the engines of growth in Europe, especially Germany, are slowing. France and Italy are showing stagnation."
On early below-average volume, benchmark 10-year Treasuries yield was last 2.391 percent, down 3.7 basis points, while five-year yield traded 3.1 basis points lower at 1.549 percent.
US yields decline further after the Labor Department said jobless claims rose more than expected at 311,000 last week but the spike did not alter the view of an improving domestic jobs market.
The fall in US yields was limited by investors selling their Treasuries holdings to make room for $16 billion in 30-year bonds, the last leg of this week's $67 billion quarterly refunding.
The first two parts of the refunding fared well with solid demand from investors, according to Treasury data.
In the "when-issued" market, the yield on the 30-year bond issue that will mature August 2044 and be auctioned at 1 p.m. (1700 GMT) was quoted at 3.2480 percent, which would be the lowest since May 2013.
While tension in Ukraine and Iraq remained high, there was a glimmer of hope for Israel where a 72-hour ceasefire was extended in a bid to buy time for the Israelis and Palestinians to reach a deal to end a one-month war in Gaza.
These conflicts have worried investors since they might worsen and take a toll on the global economy.
Before the 30-year auction, the Federal Reserve at 11 a.m. (1500 GMT) planned to buy $1.60 billion to $1.90 billion in Treasuries due 2019 to 2020, the latest for its bond purchase program that is expected to wind down in October.
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