By Marius Zaharia and Joshua Franklin
LONDON, March 4 Yields rose on German and other
top-rated euro zone bonds on Tuesday after Russia called back
troops engaged in exercises near Ukraine, reducing demand for
The move higher in yields was capped by expectations the
European Central Bank will ease monetary policy further this
year and by uncertainty over how the Ukraine-Russia dispute will
Moscow had denied that the exercises, which began last week,
had anything to do with events in Ukraine. But President
Vladimir Putin said on Tuesday that Russia has the right to use
troops to protect Russians living in the region.
Bund futures were last 44 ticks lower at 144.70,
having hit their highest since May 2013 at 145.42 on Monday as
investors piled into top-rated assets. Ten-year German yields
, the benchmark for euro zone borrowing costs, rose
4 basis points to 1.59 percent.
Equivalent Austrian, Dutch, Finnish, French and Belgian
yields also rose by 2-4 bps.
"The news overnight that Putin has recalled the troops back
to base ... that's the main driver of the market. But clearly
the situation is very uncertain," said Alan McQuaid, chief
economist at Merrion Stockbrokers.
Yields on lower-rated Italian and Spanish bonds remained
close to eight-year lows, avoiding the global risk aversion, a
further sign worries over the euro zone debt crisis have eased.
"Turn the clock back a few years and these markets would be
hit by contagion," said Nick Stamenkovic, a bond strategist at
RIA Capital Markets in Edinburgh. "But you see more signs of
growth in these countries ...(and) the ECB has backstops in
He was referring to the ECB's promise to buy government
bonds if a euro zone country gets in trouble. Expectations that
the central bank might loosen monetary policy, possibly as early
as this week, also prompted investors to put some money in
lower-rated assets to maximise their returns.
Spanish 10-year yields fell 4 bps to 3.47
percent, while Italian yields were 2 bps lower at