* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
July 7 (Reuters) – Germany’s 30-year bond yield fell to its lowest since April on Wednesday and most euro area borrowing costs touched new multi-week lows as fixed income assets extended a major rally from the previous session.
The rally on Tuesday, led by U.S. Treasuries, saw benchmark German bonds notch their best daily performance since March, as Treasury yields fell to their lowest since February.
Analysts said various factors – from Chinese regulation headlines, the spread of the Delta COVID-19 variant and weak U.S. services data – had driven the risk aversion.
Yields edged lower and borrowing costs touched new lows on both sides of the Atlantic, though moves were much smaller than on Tuesday as the region’s stock prices rose, while oil stabilised on Wednesday after volatile trading the previous session.
Germany’s 10-year yield, the benchmark for the region, was last down 1 basis point to a three-week low at -0.279% .
Its 30-year yield fell a basis point to 0.212%, the lowest since early April.
Italian 10-year yields touched a low since mid-April at 0.724%.
“The moves seemed to be more of a result of trades being stopped out rather than anything more fundamental, and the market remained relatively orderly throughout,” Mizuho analysts said, referring to Tuesday’s moves.
“There is still a lot of cash to be put to work, and the possibility of momentum funds closing shorts ahead… may sustain the strength in rates in the near-term,” they added.
Bond yields move inversely with prices.
On the data front, the European Commission will release its summer economic forecasts later in the session.
The focus for bond markets is the U.S. Federal Reserve’s June meeting minutes, which are expected following the close of the European trading session.
“We doubt that the minutes will be a major market driver, as we have heard a lot from individual FOMC members since the meeting,” said Jens Peter Sorensen, chief analyst at Danske Bank.
In the primary market, Germany will raise 5 billion euros from the auction of a new five-year bond. (Reporting by Yoruk Bahceli; editing by Barbara Lewis)
