LONDON: Euro zone yields held near recent lows on Thursday as possible US military action against Syria stoked investor concern about geopolitical risk and boosted demand for safe-haven assets.
Following hawkish minutes from the U.S Federal Reserve, central bank guidance will remain in focus on Thursday, with debt markets closely watching for minutes from the European Central Bank's March meeting.
Investors have been rattled by US President Donald Trump's threat of US military action in Syria, which sent oil prices to their highest levels since late 2014.
Trump tweeted on Wednesday that missiles "will be coming", taunting Russia for supporting Syrian President Bashar al-Assad after a suspected chemical attack on rebels.
His comments raised the prospect of direct conflict over Syria for the first time between the two world powers backing opposing sides in the seven-year-old civil war, which has also escalated a rivalry between Saudi Arabia and Iran.
Germany's 10-year bund yield, the benchmark for the bloc and a traditional safe-haven asset, hovered around 0.5 percent in midday trades.
Its US counterpart was trading as low as 2.78 percent.
US Treasury yields briefly edged higher after modestly hawkish minutes from the Federal Reserve's last policy meeting, as policymakers felt the US economy would firm further and inflation would rise in the coming months.
Investors are now waiting for minutes from the European Central Bank's March meeting, to be released at 1130 GMT.
"The ECB accounts from the overall rather unexciting March meeting will be scrutinised for hints whether or how the ECB may change its wording next time," Commerzbank analysts wrote in a note.
ECB policymakers Benoit Coeure, Jens Weidmann and Vitor Constancio are due to speak later on Thursday. Coeure suggested previously that the role of rates guidance could be strengthened but did not give specifics.
Continuing concern over a prolonged trade dispute between the United States and China are also keeping markets on edge.
China's Commerce Ministry said on Thursday that trade negotiations with the United States would be impossible because Washington's attempts at dialogue were not sincere and vowed to retaliate should Trump escalate current tensions.
ECB chief Mario Draghi said on Wednesday that the direct effect on the euro zone economy of trade tariffs announced by the United States and China is small but they can hurt investor confidence and trigger retaliation.
Elsewhere, Italy sold 9.17 billion in bonds maturing in 2021, 2025, 2038 and 2048.
Italian debt has outperformed its peers, with the premium investors demand to hold Italian 10-year bonds over top-rated German debt currently at 131 basis points, close to its tightest level since 2016.
Italian President Sergio Mattarella is scheduled to hold further talks on Thursday and Friday to try stitch together a new government after an inconclusive March 4 election.
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