Ukraine tensions push yields on safe-haven Bonds to record lows

German Bund yields fell to record lows on Wednesday as investors sought refuge in top-rated assets after Russia appeared to step up military exercises near its border with Ukraine. Data showing Italy unexpectedly slipped back into recession in the second quarter, exacerbating worries about the pace of the euro zone's economic recovery, also fuelled demand for investments perceived as offering a safe haven. ‘Geopolitical strains in Ukraine with reports of possible Russian retaliation are fuelling a flight to quality, and adding to the risk sentiment was this disappointing data out of Italy,’ DZ Bank rate strategist Christian Lenk said. ‘These two factors justify yields moving back towards record lows.’ NATO said on Wednesday that Moscow has amassed around 20,000 troops on Ukraine's eastern border and warned that Russia could use the excuse of a humanitarian or peacekeeping mission to send troops into eastern Ukraine. President Vladimir Putin has ordered his government to prepare retaliatory measures following the latest round of Western sanctions, which may include banning European airlines from flying over Russian territory. Bund yields fell 7 basis points to 1.10 per cent, a new record low, and were on track for their biggest daily fall since September 2013. Bund futures were up 85 ticks at 148.86. ‘We're going to trade pretty firm on the back of all this Russian invasion noise,’ one trader said, according to Reuters.