By Abhinav Ramnarayan
LONDON, July 29 (Reuters) - High-grade eurozone government debt yields dropped to their lowest levels in over two months as a cocktail of negative news sent investors scrambling for safe assets.
Poor corporate earnings, record deaths from COVID-19 in six U.S. states and frictions over a stimulus plan in the United States hit risk sentiment on Wednesday, and had investors retreating to safe assets such as government bonds.
Fears of rising COVID-19 infections also hit Asia and Europe this week, with several countries imposing new restrictions and Britain quarantining travellers from Spain.
"The tally of COVID-19 cases is surging further, not only in the U.S., with infection rates rising again in Europe as well during the holiday period, maybe due to a certain excessive carefreeness," analysts at DZ Bank wrote in a note.
"Meanwhile, the consensus over a second coronavirus relief package which could be used to alleviate a second wave of the pandemic is tottering, thus spawning growing concerns about the outlook for the US economy."
German 10-year Bund yields DE10YT=RR dropped to a new two-month low of -0.52% on Wednesday.
Other highly rated euro zone countries, such as The Netherlands and Austria, also saw their government bond yields hit the lowest level since mid-May. NL10YT=RR, AT10YT=RR
Worries over the world's biggest economy expressed themselves in the dollar, which is near a two-year low against a basket of currencies .DXY, and is down over 9% since the March high.
Later on Wednesday, Germany will tap its 15-year benchmark bond in a 3.5 billion euro auction.
A statement and news conference at the end of the two-day U.S. Federal Reserve meeting is due later in the session. The world's most important central bank said on Tuesday it will extend several of its lending facilities through the year-end.
(Editing by Timothy Heritage)
((Abhinav.Ramnarayan@thomsonreuters.com; 0044 751 745 1044;))
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