* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr
By Virginia Furness
LONDON, Aug 5 (Reuters) - Dutch 30-year government bond yields turned negative for the first time on Monday as euro zone yields sank further amid an escalation of the U.S.-China trade and currency war and concerns about a no-deal Brexit.
China on Monday let the yuan tumble beyond 7-per-dollar for the first time in more than a decade, in a sign Beijing might be willing to tolerate further currency weakness as the trade dispute worsens.
The 1.4% drop in the yuan comes days after U.S. President Donald Trump surprised financial markets by saying he would impose 10% tariffs on the remaining $300 billion of Chinese imports from Sept. 1, breaking a brief month-long trade truce.
The move lower in bond yields across the bloc extends sharp falls on Friday which saw Germany’s 30-year yield turn negative for part of the trading day, meaning that for the first time the entire German yield curve was under zero.
On Monday morning, this bond rallied further, with the yield dropping another seven basis points to a low of -0.053%. Ten-year bund yields were at -0.53%.
“The CNY above 7 has triggered more risk off in global bonds which is why safe-haven bond yields have continued to fall,” said Rainer Guntermann, rates strategist at Commerzbank.
Add to this the expectation of more monetary easing from the European Central Bank, and investors are shifting into riskier markets and longer-dated bonds for positive yields, he said.
Long-dated bonds continued to outperform on Monday, and most other 30-year bond yields across the bloc fell by five basis points,.
The rally did not exclude peripheral bond yields, which tend to rise in times of broader risk aversion. Italy’s and Spain’s 30-year bond yields were down four basis points each, despite political uncertainty in both countries., .
Reporting by Virginia Furness