Bund yields hug 1 percent on weak euro zone outlook

LONDON Fri Aug 15, 2014 2:42am EDT

LONDON Aug 15 (Reuters) - German Bund yields held near their record lows around 1 percent on Friday, with investors increasingly betting the ECB will ease monetary policy further to lift a stagnating economy struggling with low inflation.

Data showed on Thursday the euro zone economy failed to grow in the second quarter even before the sanctions the West and Russia imposed on each other over the conflict in Ukraine started to bite.

Russian President Vladimir Putin struck a conciliatory note on Thursday in Crimea saying Moscow would stand up for itself but not at the cost of confrontation with the outside world.

However, tensions remained high in Ukraine, where Kiev government forces were fighting pro-Moscow separatists and dozens of heavy Russian military vehicles massed near the border.

Ten-year Bund yields were last 0.4 basis points higher on the day at 1.018 percent, having briefly dipped below 1 percent on Thursday, according to traders.

"We look for Bunds to hug the 1 percent yield ... not just for today, but rather longer," Markus Koch, a Commerzbank analyst, said in a note.

Other euro zone bond yields were flat to slightly lower. (Reporting by Marius Zaharia; Editing by Toby Chopra)

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