BOND REPORT: German Bond Yields Notch Fresh Record Lows

By Dow Jones Business News, 
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By Ben Eisen, MarketWatch

U.S. investors weigh geopolitical concerns and European data

NEW YORK (MarketWatch) -- Investors flocked to the safety of German government bonds on Wednesday, as they raced to shed riskier assets amid a growing conflict in Ukraine and weak European data.

The 10-year yield, which falls as price rise, was down 6.5 basis points on the day at 1.105%, its record low, according to Tradeweb. The U.K. 10-year gilt yield fell 6.5 basis points to 2.509%.

The risk-off sentiment comes amid news that Russia is amassing troops near the border to Ukraine, raising concerns about an invasion. Italy's second-quarter GDP report showed the nation slid back into recession, while German manufacturing sank in June. European stocks fell.

The 10-year U.S. Treasury note (10_YEAR)yield initially fell alongside European yields, but cut back gains throughout the day as investors stepped back into U.S. stocks. The benchmark yield was down a basis point on the day at 2.473%, falling for the fourth-consecutive session.

"Geopolitics are on the front burner and U.S. economics are on the back burner," said Michael Cullinane, head of Treasury trading at D.A. Davidson & Co. He said he would be watching the evolving situation in Ukraine as well as European economic data for signs about the direction of U.S. yields.

The 30-year Treasury bond (30_YEAR) yield fell half a basis point to 3.275% while the 5-year note (5_YEAR) yield fell 1.5 basis points to 1.651%.

Data showed the U.S. trade deficit shrank 7% in June due to a decrease in imports of petroleum. That could have positive effects on second-quarter GDP revisions

The Treasury Department said its quarterly refunding will include $67 billion in notes and bonds next week. There was little discussion during a meeting of market experts about an idea to issue a new type of ultra-long bond that would mature in more than 30 years.

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  08-06-141606ET
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