LONDON, May 14 (Reuters) - Benchmark German 10-year Bund yields held near 2015 highs on Thursday as a global retreat from fixed income assets hammered on, ignoring macroeconomic data that would normally be supportive for bond markets.
Yields on U.S. Treasuries rose even as poor U.S. retail sales figures on Wednesday disappointed those expecting an economic rebound from a weather-weakened first quarter. A weaker outlook usually pushes investors towards the perceived safety of bonds.
The spring-back in yields from near-zero levels began on April 29, coinciding with very low, but better-than-expected German inflation figures. Selling snowballed as a small rise in yields on bonds that barely pay a coupon translated into deep falls in prices and major losses for investors that were almost unanimously positioned for a further drop in yields.
The European Central Bank hoovering up bonds from the market under its trillion-euro quantitative easing programme is exacerbating the usual liquidity drought associated with spikes in volatility, magnifying the market moves.
The sell-off has taken on a life of its own, with market technicalities such as positioning and liquidity trumping economic news.
Bund yields were a touch higher at 0.72 percent, close to their 2015 high of 0.799 percent hit last week. They traded as low as 0.05 percent in mid-April.
Moves are erratic. On Wednesday, Bund yields fell below 0.60 percent before bouncing as high as 0.78 percent, with no particular trigger to point to.
"You've got wild swings at the moment," Rabobank rate strategist, Lyn Graham-Taylor, said.
"There had to be a point where the market sells off because of higher inflation expectations, but it's been more aggressive because the lack of liquidity."
Other euro zone bond yields were flat to a tad higher, with several European markets closed for a public holiday.
Ireland will auction 750 million euros of seven-year debt on Thursday as it seeks to pre-fund the state in full for 2016, the country's debt agency said on Monday.
Ireland has already completed 9.5 billion euros out of its guided range of 12 billion to 15 billion of debt to be issued this year, including February's sale of its first 30-year bond at record low interest rates.
The latest rise in yields questions the safe-haven properties of top-rated German debt. Many investors use German Bunds to counter volatility in equity markets with the two assets traditionally going in opposite directions.
But with central banks pouring trillions of dollars into government debt, that bond-stocks relationship has become distorted. The sell-off in bonds is now affecting stock markets as well.
The pain is greater in long-dated bonds. Thirty-year Bund yields have risen by one percentage point in the past three weeks to below 1.4 percent.
But the price swing has been dramatic. The bond has lost a fifth of its face value over that period.
"As yields rise, there is less need for investors to reach for yield into the long end," Societe Generale strategists said in a note.
"Heads 30-year yields go up, tails 30-year prices fall." (Editing by Louise Ireland)