| LONDON, June 25
LONDON, June 25 German government bond yields
fell towards their lowest levels this year on Wednesday as
worries over violence in Iraq pushed investors towards assets
perceived as safe havens.
Sunni insurgents battled government forces for control of
Iraq's biggest refinery, keeping oil prices close to $114 per
barrel, with some analysts fearing a further rise could
pose a risk to the global growth outlook.
"It's a volatile situation in Iraq and Treasuries and Bunds
benefit from flight to quality," said Nick Stamenkovic, bond
strategist at RIA Capital Markets in Edinburgh.
German 10-year Bund yields fell 1.5 basis
point to 1.31 percent just above this year's low of 1.285
percent. Bund futures were 18 ticks higher at 146.29,
having risen by almost two points in the past two weeks.
Yields on the euro zone's lowest-rated bonds were a tad
higher as investors made room on their books before debt sales
The Treasury plans to sell up to 3.5 billion euros of
inflation-linked debt and zero-coupon bonds later in the day and
up to 8 billion euros of bonds on Friday.
Italy has completed more than 60 percent of its 2014 funding
programme, while Spain has completed more than 70 percent of its
plan as the bloc's most indebted governments try to exploit
record low borrowing costs to build financing buffers.
Debt managers in Spain, Italy and Portugal said on Tuesday
they planned to push ahead with measures to raise the average
life of their debt and manage redemptions in a bid to quell
concerns about a large refinancing hump.
Italian and Spanish 10-year yields
were last 1 bps higher at 2.78 percent and 2.67
percent, respectively. Both have fallen sharply this week as
weak euro zone activity data rekindled speculation the European
Central Bank could launch a programme of large-scale asset
purchases - or quantitative easing (QE) - in the future.
The ECB cut its key interest rates last month and promised
more liquidity to banks via long-term loans called targeted
long-term refinancing operations or TLTROs. It has signalled it
would take a wait-and-see approach in the near term.
"The grand scepticism is that TLTROs are not going to work
so you'd think they'll do QE," one trader said. "They're not
going to do it this year, but the carry trade still rules."
(Editing by Nigel Stephenson)