* Eurozone yields start in August with a drop after the drop in July
* PMI survey shows robust factory orders
* Analysts say US rates market should give direction
* Eurozone Periphery Government Bond Yields tmsnrt.rs/2ii2Bqr (updates throughout, add quote)
LONDON, Aug. 2 (Reuters) – The German government’s 30-year borrowing costs fell below 0% on Monday, pushing the entire yield curve into negative territory for the first time since early February as Euro debt markets followed a further decline in US Treasury yields.
The bond rally came after the Institute for Supply Management said the U.S. manufacturing sector grew at a slower pace in July for the second month in a row, reinforcing the idea that economic growth had peaked.
This sent ten-year Treasury yields to a low of 1.184% on July 20, reversing earlier upward moves that were driven by optimism about more fiscal stimulus in the United States and the United States. improved sentiment of actions.
The latest moves continue the July rally, the largest since at least March 2020 in global bond markets, driven by the risks of the COVID-19 Delta variant and central bank assurances that a reduction in monetary support was still far.
The German 10-year government bond yield closed at minus 0.48%, down almost 3 basis points on the day and the lowest since early February, after already falling 25 basis points in July.
The notable driver was the 30-year yield which turned negative after almost six months in positive territory and traded slightly below zero towards the close of trade.
German 10-year inflation-adjusted or “real” bond yields fell to a new all-time low of minus 1.878%.
The moves appeared at odds with strong economic data which showed German retail sales rose much more than expected in June, while final surveys of the Eurozone’s Purchasing Managers Index (PMI) were better than previous estimates.
Counteracting this, the European Central Bank said it had bought far more bonds in the past two months than the four main countries in the bloc sold. Real yields have fallen nearly 30 basis points since the ECB’s July 8 strategic review, which signaled determination to meet its revised inflation target.
“What really gave the final boost to real yields was the review of the ECB’s strategy, when they established that the ECB should have a symmetrical inflation target,” said Althea Spinozzi , bond strategist at Saxo Bank.
“It also implies that there is a continued commitment from the ECB to guarantee easy financing conditions.”
Falling US Treasury yields added to the pressure, she said, adding, “If the US Treasury (yields) were much higher… we would have been talking about a different kind of level.”
Tradeweb said on Monday that more than 70% of eurozone government bonds on its platform carried negative yields, while more than half of the yields on quality corporate bonds were below zero.
Developments in the US market are expected to remain under control for the remainder of the week, with employment data due on Friday. (Reporting by Tommy Wilkes, Sujata Rao and Yoruk Bahceli; editing by Andrew Heavens)