* Geopolitics rattles financial markets
* German Bund yields drop below 0.20 pct
* French election also frays investor nerves
* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By John Geddie
LONDON, April 11 Safe-haven German Bund yields
dipped below 0.20 percent for the first time in more than five
weeks on Tuesday after the United States said it may authorise
more strikes on Syria in a move that has escalated tensions with
Across global markets, assets seen as low risk such as
highly-rated debt, gold and stable currencies like the Japanese
yen were in demand, while stocks fell.
The United States and its allies blame Syrian President
Bashar al-Assad for a poison gas attack that killed 87 people in
northern Syria a week ago. The Syrian government denies blame.
After U.S. cruise missiles hit a Syrian air base last week,
the White House said on Monday it was ready to retaliate again
if the Syrian government uses chemical weapons or deploys barrel
bombs in the country.
The intervention has put U.S. President Donald Trump's
administration in open conflict with Russian President Vladimir
Putin, who has stood firmly by Assad.
U.S. Secretary of State Rex Tillerson carried a unified
message from world powers to Moscow on Tuesday, denouncing
Russian support for Assad. Some countries are proposing further
sanctions on Moscow.
"Market moves generally fit with the theme of a moderate
risk-off tone amidst on-going geopolitical concerns," RBC's
global macro strategist Peter Schaffrik said.
Analysts said European markets were also reeling from the
race for the French presidency, as far-left candidate Jean-Luc
Melenchon climbs into contention.
Opinion polls have shown Melenchon - who, like far right
Marine Le Pen, wants a referendum on EU membership - surging in
recent days, with an Ifop survey on Tuesday putting him in third
place ahead of conservative Francois Fillon for the first round
of voting later this month.
Japanese bank Nomura said on Tuesday it would enter an
"outright short" position to bet against French government bonds
if Melenchon were to face Le Pen in May's presidential
Japanese investors dumped a record amount of French bonds in
February, data from Japan's Ministry of Finance showed on
German 10-year bond yields dropped around 3 basis points to
0.192 percent on Tuesday, their lowest since Feb
27. The bonds last yielded 0.204 percent, down 1.5 bps on the
French equivalents rose as much as 5 bps to a one-week high
of 0.985 percent, stretching the gap between the
benchmarks to its widest in six weeks.
Yields on low-rated bonds of southern European countries
like Italy and Portugal also rose as investors ditched riskier
assets. Italian 10-year yields rose 3.1 bps to
2.27 percent and Portuguese equivalents added 2.6
bps to 3.87 percent.
In primary markets, the Netherlands sold just under 1
billion euros of a 16-year bond while Austria is selling a new
10-year bond via a group of banks.
For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Editing by Janet Lawrence)