August 4, 2017 / 7:37 AM / a year ago

U.S.-Russia probe pins govt bond yields at one-month low

* Probe into Russian meddling in U.S. election deepens

* Expectations for U.S. jobs data muted

* Euro zone periphery govt bond yields

By John Geddie

LONDON, Aug 4 (Reuters) - Europe’s benchmark government bond yield and U.S. equivalents were pinned near one-month lows on Friday as an investigation into suspected Russian meddling into the 2016 U.S. election gathered pace.

Reuters reported on Thursday that a grand jury has issued subpoenas in connection with a meeting before the election that included President Donald Trump’s son, his son-in-law and a Russian lawyer.

For investors, the development serves as yet another sign that Trump may be distracted from seeing through ambitious spending plans he pledged when elected.

U.S. yields — a bellwether for global bond markets which soared to more than a two-year high after Trump’s election — have been falling for most of 2017 as the President’s travails have cooled expectations for growth and inflation.

A run of lacklustre economic data has also sowed doubt over how quickly U.S. central bankers can tighten monetary policy in the world’s biggest economy. Jobs and unemployment data later on Friday are key events for financial markets.

“The mounting U.S. economic gloom mean that expectations for today’s employment report are likely lower than the consensus,” Mizuho’s head of euro rates strategy Peter Chatwell said.

Economists polled by Reuters expect the U.S. economy to have added 183,000 jobs in July, down from 222,000 the previous month, with the unemployment rate to have edged down to 4.3 percent from 4.4 percent previously.

An announcement expected on Friday of a U.S. inquiry into China’s trade practices — a move which could cause friction between the two superpowers — has been postponed.

U.S. 10-year bond yields slid to their lowest levels in over a month at 2.22 percent on Thursday after Reuters reported on the subpoenas and held near that level on Friday.

German equivalents traded lower on Friday, matching a one-month low of 0.45 percent struck Thursday after a dovish central bank meeting in Britain soothed concerns of broader tightening in global monetary conditions.

Most other euro zone yields were flat or a touch higher on Friday.

For Reuters Live Markets blog on European and UK stock markets see reuters://realtime/verb=Open/url=

Editing by Catherine Evans

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