LONDON, July 18 (Reuters) - German Bund yields traded near record lows on Friday as investors bought assets perceived as safe havens after a passenger plane was shot down over eastern Ukraine, heightening tensions between Russia and the West.
Israel’s stepping up early on Friday of its ground offensive in Gaza also fed a rise in risk aversion among investors.
German Bund yields were flat at 1.16 percent, having fallen as low as 1.137 percent overnight. They were within a whisker of their record low of 1.126 percent, hit in July 2012 at the height of the euro zone debt crisis.
“These are tragic events but we’ve seen in the past that geopolitical factors can drive markets one day but they don’t have a lasting effect,” said KBC strategist Mathias van der Jeugt. He said investors were waiting to see what happens next before deciding whether more safe-haven buying was warranted.
Bund futures rose 7 ticks to 148.27, having hit an all-time high of 148.48 overnight.
World leaders demanded an international investigation into the plane crash, which killed all 298 people on board, with the United States demanding a ceasefire between Kiev and pro-Russian separatists to allow the probe to take place.
The disaster could intensify international pressure to resolve the crisis in Ukraine, which has killed hundreds since protests toppled the Moscow-backed president in Kiev in February and Russia annexed the Crimea a month later.
Western leaders have already tightened economic sanctions on Moscow for what they say is its failure to rein in the violence.
Yields on lower-rated euro zone bonds rose, led by Portugal, whose debt has underperformed recently on worries about the financial health of firms of the Espirito Santo family, founders of the country’s largest listed bank.
Portuguese 10-year yields rose 7 basis points to 3.77 percent, while Spanish and Italian yields rose 3 basis points, to 2.66 percent and 2.82 percent respectively.
“We’re seeing a large risk-off move after what happened in Ukraine and Gaza,” said Lauri Haelikkae, fixed income strategist at SEB. (Editing by Catherine Evans)