May 7, 2019 / 11:19 AM / 17 days ago

UPDATE 1-Euro zone yields dip as German industrial orders disappoint

* German industrial orders up after 2 months of falls

* But small rise points to lacklustre growth

* German 10-year yield turns negative

* Pessimism on U.S.-China trade talks weigh

* Ireland announces 30-year syndicated bond

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Adds quote, updates prices)

By Abhinav Ramnarayan

LONDON, May 7 (Reuters) - Germany’s 10-year bond yield fell into negative territory on Tuesday as industrial orders from Europe’s largest economy came in well short of expectations, and on worries over faltering trade talks between the United States and China.

The March orders figures marked an end to two months of steep declines, but were weaker than expected, pointing to lacklustre growth.

Worries about the euro zone economy have centred around Germany’s export-oriented economy, which has had a rough few months and could be in the line of fire should U.S. President Donald Trump turn his attention to Europe in efforts to redraw trade relations with the world.

Bond yields have fallen sharply this year on expectations the European Central Bank will need to ease policy further to kickstart a moribund economy.

Germany’s 10-year bond yield rose a basis point to 0.02 percent in early trade but was three basis points lower on the day at minus 0.02 percent by midday in London.

Other high-rated euro zone bond yields were 2-3 bps lower on the day.

“We are still in the downward trend channel. As long as there is no major positive news, I don’t see the chance of a breakthrough and we will remain on low levels or drop further,” said DZ Bank rates strategist Daniel Lenz.

He added that news of faltering trade talks between the United States and China also put downward pressure on yields.

Top U.S. trade officials said on Monday that China backtracked on substantial commitments it made during talks with the United States, prompting President Donald Trump to impose additional tariffs on Chinese goods slated to go into effect on Friday.

“This is a breakdown of negotiations between the U.S. and China and with some people coming back from holidays today, there has been a reassessment,” said Mizuho’s head of rates Peter Chatwell.

Having already fallen on Monday, U.S. Treasury yields dipped about two basis points across the curve, with the benchmark 10-year yield at 2.47 percent, not far from a one-month low hit at the start of May.

Elsewhere, Ireland plans to issue a new 2050 bond via a syndicated sale in the near future, its debt agency said on Tuesday, with a source indicating a size of around 3 billion euros.

Reporting by Abhinav Ramnarayan Editing by Andrew Heavens and Kirsten Donovan

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