LONDON, May 24 (Reuters) – French government bond yields hit their lowest level since last October on Thursday as investors sought value in debt markets other than Germany as well as in longer-dated Bunds.

Market players have taken refuge in safe-haven debt as the euro zone’s debt crisis has deepened amid widespread uncertainty over Greece’s future in the euro and Spain’s struggling banking system.

With German yields hitting record lows, there was strong demand for other relatively safe bonds, including those of Austria and Belgium.

“What I think is happening is the central banks are probably buying the euro as it goes down. When they build up euro assets they have to invest it and they don’t like Bund yields so France has been the market of choice and France has dragged (in) Belgium and Austria,” a trader said.

Traders also said French bonds had been benefiting from hedge funds covering previously held short or sell positions.

Ten-year French government bond yields fell to their lowest since October 2011 at 2.576 percent and were last down 13 basis points on the day at 2.61 percent.

Belgian 10-year yields shed 10 bps to 3.27 percent and the Austrian equivalent fell 7.2 bps to 2.35 percent.

LONDON, May 24 (Reuters) – German Bund futures hit a fresh record high on Thursday after data showed Germany’s manufacturing sector shrank at the fastest rate in three years in May, reinforcing concerns over the region’s ability to grow at a time of crisis and austerity.

Investors have already been flocking into safe-haven debt on fears Greece may have to leave the euro and analysts say German bond prices could rise further with no crisis solution in sight.

A summit of European Union leaders was overshadowed by German-led resistance to lobbying for mutual euro zone bond issuance and measures to help embattled debtor economies, such as giving countries like Spain an extra year to make spending cuts.

“The deepening of the crisis in sovereigns in the last two months I think will affect growth in the next two quarters,” Alessandro Giansanti, senior rate strategist at ING said.

“We have seen so far a decoupling of Germany compared to the other regions in the euro but it cannot last. If there is deeper recession in the periphery and a slowdown in China, even Germany will have a softening of growth.”

German Bund futures hit a record high of 144.55 and last traded 32 ticks higher at 144.37.

Ten-year German government bond yields fell to a record low of 1.35 percent and thirty-year bonds outperformed the rest of the curve with yields 8.8 bps lower at 1.91 percent – a new all-time low.

LONDON, May 23 (Reuters) – German government bond yields fell to record lows on Wednesday as investors bought the safest assets before a meeting of euro zone leaders to discuss the debt crisis, while a sale of two-year bonds carrying a zero percent coupon drew strong demand.

Thirty-year government bond yields fell below 2.00 percent for the first time, while two-year bond yields fell as far as 0.02 percent – much lower than the 0.11 percent and 0.29 percent offered by similar Japanese and U.S. debt.

The zero percent coupon and record low yield of 0.07 percent offered by the new Schatz notes did little to deter investors hungry for safety amid speculation that Greece could leave the euro. The auction attracted 1.7 times the amount on offer, suggesting German yields may have room to fall in coming weeks.

This so-called “flight to quality” is likely to continue in the run-up to a Greek election on June 17, its second in two months, which could produce a government opposed to the stringent conditions of the country’s bailout deal.

The vote is widely seen as a referendum on whether the debt-laden country should stay in the euro zone and undertake painful reforms and austerity, or leave and try its luck with its own currency. Polls suggest the result could go either way.

“People just want to make sure that they are going to get their money back. The outcome is so binary as to what can happen in the next month or so that people just don’t want to take risks,” said Gary Jenkins, director at Swordfish Research.

He said it was possible German bond yields could turn negative if sentiment worsened.

LONDON, May 21 (Reuters) – Key measures of counterparty risk have stabilized in recent months and are seen range-bound, with market players looking to the European Central Bank monetary policy meeting in June to see whether it will signal further monetary stimulus.

The Greeks also go to the polls next month and if pro-bailout parties do not manage to win a majority that would increase speculation the country would run out of money and that it would eventually be forced out of the euro.

The three-month spread between Libor rates and overnight index swap rates – an indicator of financial stress – fell from 55 basis points to around 30 basis points between the beginning of March and early April as sentiment on the euro zone improved.

Since then, however, the spread has stopped falling, stabilising at around 30 basis points for the past two months, as the impact of cheap European Central Bank (ECB) financing faded while euro zone tensions resurfaced due to worries about Spain’s finances and speculation that Greece may eventually leave the euro.

One trader said that if Greece left the euro the LIBOR/OIS spread could immediately jump sharply higher in a knee-jerk reaction. He said spreads could initially rise as far as 60-70 bps and that only the ECB could prevent a further rise in the measure of counterparty risk. In December of last year, the spread rose as far as 93 bps on worries about the euro zone.

“Until the ECB comes in and offers (banks) another long-term (refinancing operation), there is no reason for (spreads) not to blow out,” the trader said.

The ECB in December and February offered two rounds of cheap 3-year financing which helped ease tensions in both money markets and sovereign debt markets at the beginning of 2012.

LONDON, May 9 (Reuters) – Investors stepped up their retreat from riskier euro zone bonds on Wednesday, as selling drove Spanish yields above 6 percent on worries over how its banks would meet government demands for a hefty recapitalisation. This backdrop, combined with uncertainty about Greece’s political future, sent investors back to the safety of German debt and rising demand was expected to keep pushing 10-year bond yields lower after they fell below 1.5 percent for the first time ever.

“Spain is obviously in focus, it’s more fuel on the fire and there is only bad news today … all in all I think this turmoil is going to continue,” a trader said.

Financial sources said Spain will demand banks set aside another 35 billion euros to protect against souring building sector loans.

With capital markets largely shut for Spain’s embattled banking sector, investors fretted over whether the burden of providing extra funding may eventually fall to the state - already under pressure from markets over its own weak finances.

“We have always made the point that (Spain’s) bank and sovereign risk are closely correlated or very much interlinked and the market doesn’t really discriminate that much,” Michael Leister, strategist at DZ Bank said.

“It was really beneficial for both in January or February when you had this LTRO-related rally … and now we are seeing the other side of the coin, which is that concerns regarding the banks are hitting the sovereign as well.”

Spain’s 10-year government bond yields jumped 22 basis points to 6.09 percent. That represented their highest in around two weeks and traders pointed to a break of April’s high at around 6.16 percent as the potential catalyst for a new rapid rise.

LONDON, May 9 (Reuters) – Spanish government bond yields broke through the psychologically important 6 percent level as concerns about the country’s leveraged banking system hurt appetite for risk, benefiting a sale of five-year safe-haven German bonds.

Concerns that Spanish banks would be forced to raise money to cover their property assets put pressure on European stock markets and the country’s bond yields rose beyond 6 percent - above which a move towards unsustainable levels tends to accelerate.

This backdrop, combined with uncertainty about Greece’s political future, underpinned demand for German bonds at an auction and drove Bund futures to record highs.

“We have always made the point that (Spain’s) bank and sovereign risk are closely correlated or very much interlinked and the market doesn’t really discriminate that much,” Michael Leister, strategist at DZ Bank said.

“It was really beneficial for both in January or February when you had this LTRO-related rally … and now we are seeing the other side of the coin, which is that concerns regarding the banks are hitting the sovereign as well.”

Spain’s 10-year government bond yields jumped 18 basis points to 6.05 percent, having earlier hit 6.056 percent – their highest in about two weeks.

Shares in Spanish banks came under pressure after financial sources told Reuters that the country will demand banks set aside another 35 billion euros ($45 billion) against loans to builders, as the country tries to rebuild confidence in a sector where huge losses have raised fears it may need an international bailout.

LONDON, May 9 (Reuters) – Five-year German bond yields held near record lows on Wednesday ahead of an auction as investors weighed up appetite for safety against record low returns, with deep-seated concerns about Europe’s political and economic landscape dominating sentiment.

That uncertainty combined with unease about Spain’s debt-ridden commercial banking system drove that country’s benchmark yields through the key 6 percent level.

The backdrop was fundamentally favorable for the issuance of safe-haven German debt, with worries over Greece’s political future and membership of the euro, and questions about whether French president-elect Francois Hollande would act on his growth-friendly rhetoric.

But for some, a 5 billion euro auction of a new 5-year Bobl would be a hard sell given the meager returns on offer.

Five-year yields rose 1.6 basis points to 0.54 percent, as traders tried to cheapen prices to make way for the auction. They earlier touched a record low of 0.52 percent.

“I don’t think it’s going to be a big success because we are at a level where we don’t see any buyers from the retail side. We only see traders trying to take five or ten ticks in the cash market” said Charles Berry, trader at Landesbank Baden-Wuerttemberg.

“My bid-cover ratio guess is something like 1.1, 1.2. I simply cannot imagine that people will run and rush into this auction.”

LONDON, May 8 (Reuters) – Benchmark German government bonds hit new record price highs on Tuesday, knocking yields to their lowest ever as market nerves frayed over Greece’s chances of keeping its euro membership after an election of mainly anti-austerity politicians.

The rally was expected to slow down, however, given the price.

A five-year German debt auction could even put the brakes on on Wednesday if bidders show reluctance to buy the bonds at levels close to record lows yields.

While the defeat of Greece’s pro-bailout parties in Sunday’s election raised concerns over whether the country can keep vital international aid flowing and made investors risk averse, markets were not in a state of panic.

“We continue in a risk off mode, but a lot of the bad news is priced in,” one trader said. “A lot of people have given up on Greece already … and you’ve got to wonder – is Europe going to emerge stronger if Greece goes its own way?”

“Sure the markets are nervous and Bunds can go a little higher. But if (10-year) yields get to 1.40-1.45 we would be looking to sell.”

Benchmark 10-year Bund yields hit a record low of 1.542 percent, 6 basis points lower in the day. Bund futures hit a record high of 142.55, continuing a multi-week rally that has taken them more than 700 ticks higher.

LONDON, May 8 (Reuters) – German Bund futures flirted with record highs on Tuesday as elections that dealt a blow to Europe’s austerity drive and failed to endorse Greece’s main pro-bailout parties drove investors to seek safe havens.

Top-rated German debt and sales of Dutch and Austrian bonds benefited from multiple doubts about whether Greece can pursue the reforms needed to keep international aid flowing and how far new French Socialist leader Francois Hollande can change Europe’s policy focus from austerity to restoring growth.

“Part of it is the uncertainty about Greece. The most likely scenario is that they repeat elections now in the middle of June and of course we don’t know what the outcome will be,” Achilleas Georgolopoulos, strategist at Lloyds Bank said.

The first meeting between Hollande and German Chancellor Angela Merkel, whose country has spearheaded Europe’s austerity drive, would be vital, he said.

“Up to then, everybody is going to talk about how growth can be combined with austerity, but we need something concrete. And until we get that it’s going to be a push for lower (German) yields,” Georgolopoulos added.

Ten-year German government bond yields fell 3.2 basis points to 1.57 percent – not too far from a record low of 1.549 percent.

German Bund futures rose 41 ticks to 142.23 and hit a session high of 142.34 – within sight of the record 142.44 hit on Monday in volumes thinned by a public holiday in Britain.