(Adds comments, context)
By Marius Zaharia
LONDON Aug 11 German bond yields bounced off
record lows on Monday after Moscow said late on Friday it had
finished military exercises near Ukraine criticised as
provocative by the West, curbing flows into assets perceived as
But talk of a ceasefire in Ukraine, a possibility raised by
a pro-Russian separatist leader on Saturday, evaporated as
government forces pushed to recapture Donetsk.
In the Middle East, Israel and the Palestinians agreed on
Sunday to a new 72-hour truce in Gaza.
In Iraq, U.S. air strikes against Islamic state targets were
seen by some analysts as aiding stability, curbing risks of oil
supply disruptions from OPEC's second-largest producer.
"There has been a slight easing in (global) geopolitical
tensions but the underlying situation ... remains fragile," said
Nick Stamenkovic, bond strategist at RIA Capital Markets.
Bund futures fell 23 ticks to 149.25, with 10-year
German yields rising 2 basis points to 1.07
percent, having hit a record low of 1.024 percent on Friday.
The conflicts in the Middle East and Ukraine have kept
traders on their toes at the start of a month known for very low
activity due to the summer holidays in the northern hemisphere.
Last week's volumes in Bund futures were, at 3.5 million
lots, the largest since June and above a weekly average of just
below 3 million in 2014. Volumes in Italian BTP futures
were the highest since May at just below 360,000 lots.
Spanish and Italian 10-year yields
each fell 3 basis points to 2.55 percent and 2.81
Italy's Senate has passed on Friday a first reading of a
hotly contested constitutional reform bill backed by Prime
Minister Matteo Renzi.
The slow speed of Italy's reforms came under closer scrutiny
in financial markets last week after data showed the euro zone's
third-largest economy slipping back into recession.
"Structural measures promised by Renzi are still to be seen,
and with last week's poor GDP numbers the time is running out,"
said Suvi Kosonen, an analyst at Nordea.
(Reporting by Marius Zaharia, editing by John Stonestreet)