* ECB leaves rates unchanged, may uses other measures
* Diplomatic talks in Ukraine also weigh on safe-haven debt
* Economic optimism boosts Greek bonds
By Joshua Franklin
LONDON, March 6 German government bond yields
rose on Thursday, led higher by the European Central Bank's
decision to keep interest rates on hold and as talks to resolve
the crisis in Ukraine dampened demand for safe-havens.
The ECB left rates unchanged in the face of uncomfortably
low inflation, wrong-footing a minority in markets who had
expected a cut.
But ECB President Mario Draghi may use a news conference at
1330 GMT to unleash other measures to pep up a fragile euro zone
recovery, such as ending the so-called sterilisation of bond
purchases under the its Securities Markets Programme (SMP).
"There's still a possibility that (Draghi) will announce
some measures on the liquidity side which are usually not
announced before the press conference," said Piet Lammens, a
strategist at KBC in Brussels. "So there might be some
non-sterilisation of the SMP programme which people talk much
German 10-year Bund yields, the benchmark for
euro zone borrowing costs, rose 4 basis points to 1.65 percent.
Talks to resolve the crisis in Ukraine were seen easing
tensions and they also dragged on Bunds. Although high-level
talks on the Ukraine crisis made little apparent headway on
Wednesday, the diplomatic efforts were due to continue on
Elsewhere, junk-rated 10-year Greek bond yields
hit near-four year lows on Thursday, driving them
below those on 30-year debt for the first time
since late 2013.
Greece is emerging from a six-year recession and recorded a
primary budget surplus in January. The improved outlook helped
Greek yields to their lowest since the country's debt was
restructured in March 2012.
"In general, the story around Greece is clearly improving.
There's indications of momentum within the economy. The primary
surplus has come through earlier than anticipated," said Mark
Wall, chief euro area economist at Deutsche Bank.
Greek 10-year yields slid 21 basis points to
6.65 percent, while 30-year yields were 13 bps down at 6.69
percent. This moved the curve back to a more normal upward
slope, a sign of investor confidence.
In well-bid debt auctions on Thursday, Spain hit the top of
its target range, raising 5 billion euros, while France sold
just short of 8 billion euros worth of bonds.
Spanish 10-year yields were up 1 bps, while
the higher-rated French equivalent rose by 5 bps.