| LONDON, July 18
LONDON, July 18 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
(Editing by Catherine Evans)