LONDON: Germany's 10-year government bond yield fell further into deeply negative territory on Thursday ahead of key European PMI data and as voters in the UK and Netherlands head to the polls to vote in the European Parliamentary elections.
Early indications from French and German PMIs indicate a small uptick in the overall euro zone figures, while German business sentiment will also be watched.
It has been a dismal few months for the global economy with the trade conflict sending a frisson through markets and chilling business activity across the world. Europe in particular has seen its recovery sputter and Germany's industrial sector - the continent's engine room - has actually gone into reverse.
Final growth figures confirmed that GDP had risen 0.4% quarter on quarter, driven by stronger household spending and a pick-up in construction.
"Market consensus is for these (euro zone PMI) to rise slightly so I don't expect the market to get too carried away if they move upwards, but there is downside risk," said Peter Chatwell, head of rates strategy at Mizuho.
Germany's 10-year government bond yield fell two basis points to -0.10%, sliding back down towards the recent 2-1/2 year low of -0.132%.
European parliamentary elections begin on Thursday with voters heading for the polls in the UK and Holland. Initial results will be announced on Sunday evening.
The rise of populist, eurosceptic parties has thrust the European elections, normally a dull affair mostly ignored by global markets, to the forefront of portfolio managers' list of concerns.
Investors are weighing the chances of eurosceptic groups grabbing a third of the seats.
Britain's last-minute participation in the elections will boost support for eurosceptic groups in the European parliament by about 1.5 percentage points, according to Goldman Sachs estimates. Overall, they see support for the populist parties rising to 20-25% from around 15%.
U.S. Treasury yields also slipped lower after Fed minutes showed that rates would likely remain at current levels for some time, with the central bank's patient stance reiterated.
"Members observed that a patient approach. ..would likely remain appropriate for some time," with no need to raise or lower the target interest rate from its current level of between 2.25 and 2.5 percent, the Fed on Wednesday reported in the minutes of its April 30-May 1 meeting.
Ten-year U.S. Treasury yields extended Wednesday's three basis point fall by a further two basis points to trade at 2.37 percent.
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