LONDON: German bond yields edged down 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 300,000 Bund future contracts traded by 1530 GMT, a fraction of last week's 750,000 daily average.
Ten-year yields fell 1 basis point to 0.28 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 - fell 2 percent on Monday as data showing higher Middle East oil production and record hedge fund buying sparked profit-taking.
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.
Monday's fall in yields would have been deeper had it not been for data that showed U.S manufacturing rose for a second straight month in April, further evidence of economic strength that could support an interest rate rise from the United States next month.
Dallas Federal Reserve President Robert Kaplan said he could back a rise in rates as soon as June or July if US economic data firms up as he expects, comments that triggered selling in bonds on Friday and pushed yields higher.
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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