LONDON: German Bund yields forged a new one-month low on Thursday with demand for safe haven debt propped up by global growth worries, stock market woes and a rebounding single currency.
The European benchmark 10-year yield has been edging steadily lower over the past fortnight, homing in on a 2016 trough of 0.075 percent struck on April 11 and a record low of 0.05 percent set last year.
Global shares fell broadly on Thursday, with the Dow Jones Industrial Average recording its biggest daily fall since February following downbeat quarterly retail reports in the world's largest economy.
Strategists said a stronger single currency, which has firmed over 1 percent against the U.S dollar in the last three months, has also underpinned demand for euro-denominated assets such as bonds.
"Bunds looks set to remain resilient amid shaky risk sentiment and a rebounding euro," Commerzbank strategist Rainer Guntermann said.
"We still expect Bund yields to test the lower bound of the range and indeed new all-time lows before long."
In a sign of this demand for euro zone bonds, more than 10 billion euros of orders were placed for a rare 50-year debt from Spain on Wednesday. More than 80 percent of the 3 billion bonds issued were placed with foreign investors.
At the auctions on Thursday, Ireland will sell bonds maturing in 2022 while Italy will sell three-, seven- and 15-year bonds.
This will close off weekly supply which ING estimates will top 20 billion euros.
Euro zone yields were broadly lower on Thursday with Greek 10-year yields leading the pack, down 5 basis points at a new six-month low of 7.62 percent.
With hopes high that Athens will soon clinch a debt deal with creditors, strategists said Greek markets had been given another lift by expectations that the European Central Bank may re-instate cheap funding for the country's troubled lenders.
The ECB could waive its minimum credit rating on Greek bonds after Athens reaches a deal with creditors, Reuters reported last month, allowing banks to use the debt as collateral for cheap funding after almost a year on an expensive liquidity lifeline.
The previous waiver was ditched last year when Greece almost tumbled out of the euro zone, refusing to meet its bailout commitments, exacerbating its debt crisis.
"This topic, the recent positive tones around the bail-out review as well as the prospect of an actual debate around debt relief have driven Greek bond yields substantially lower over the recent weeks," RBC strategist Peter Schaffrik said.
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