June 19, 2018 / 6:46 AM / in 4 months

Euro zone bond yields drop as US, China exchange tariff threats

LONDON, June 19 (Reuters) - Euro zone government bond yields dropped across the board on Tuesday morning, tracking U.S. Treasury yields lower, as an escalating trade conflict between the United States and China fuelled demand for safe haven assets.

U.S. President Donald Trump threatened on Monday to impose a 10 percent tariff on $200 billion of Chinese goods, prompting a swift warning from Beijing of retaliation.

The Shanghai SE Composite Index was down 4.9 percent on Tuesday, its biggest one-day drop since February 2016.

U.S. Treasury yields, which move inversely to price, were down 4-5 basis points across the curve, with 10-year yields hitting a 2-1/2 week low of 2.866 percent in early trade.

Euro zone yields followed suit, and Germany’s 10-year government bond, the benchmark for the region, hit a two-week low of 0.363 pct.

Most other high-grade euro zone government bond yields were also 2-3 bps lower on the day. (Reporting by Abhinav Ramnarayan)

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