LONDON May 2 German Bund yields dipped to their
lowest in 11 months on Friday after Ukrainian troops launched a
raid to try to retake a town from pro-Russian separatists,
although a looming U.S. jobs report limited market moves.
In what has become the worst confrontation between Russia
and the West since the Cold War, Ukraine tried to retake the
eastern town of Slaviansk sending in military helicopters, one
of which was shot down by separatists.
In times of increased geopolitical risk, investors park
their money in top-rated assets, with German Bunds seen among
the safest in the world.
Ten-year Bund yields, the benchmark for euro
zone borrowing costs, fell as low as 1.454 percent before
retreating to 1.46 percent, 1 basis point lower on the day.
In another sign of normalisation in the euro zone's
peripheral markets, yields on lower-rated euro zone bonds dipped
as well, with Spanish 10-year yields close to
breaching 3 percent for the first time in nine years.
Traders said Spanish, Italian and Irish bonds were not
treated as risky assets anymore and were seen as a safer
alternative to equities.
"The situation in Ukraine is getting more attention this
morning ... but Europe as a whole feels OK," one trader said,
adding that the prospect of a long weekend in London due to a
bank holiday on Monday made investors extra cautious.
Market moves were limited before the release of a key
release of U.S. jobs data.
Non-farm payrolls probably advanced by 210,000 jobs this
month, stepping up from a 192,000-gain in March, according to a
Reuters survey of economists.
"If payrolls are strong, the rise in U.S. yields will be
much more significant than in European yields," BNP Paribas rate
strategist Patrick Jacq said.
"Growth remains subdued (in Europe) and the market remains
convinced the trend in inflation is on the downside."
U.S. 10-year yields were 2 basis points higher
on the day at 2.63 percent, having dipped about 5 bps on
Thursday, when European markets were closed.
(Reporting by Marius Zaharia; Editing by Toby Chopra)