German 30-year yields edge lower from 14-year peak, Ukraine talks in focus

By Stefano Rebaudo

Aug 13 (Reuters) - German 30-year bond yields fell on Wednesday, retreating from a 14-year high hit the previous day, after partially catching up with short-dated yields and re-steepening the curve.

The summit between Russian President Vladimir Putin and U.S. President Donald Trump over Ukraine will be in focus.

Analysts mentioned Dutch pension reforms, which are expected to reduce demand for long-dated bonds, and expectations for a massive increase in German fiscal spending as the main drivers of the sell-off in long-dated bonds on Tuesday.

They expect a growing imbalance between bond demand and supply to weigh on prices, which move inversely to yields.

Tuesday’s move steepened curves across the euro area, reversing a flattening trend that had persisted almost uninterrupted since mid-July.

Yield curves steepen when long-dated yields rise faster than the short-dated ones.

Germany's 30-year government bond yield dropped one basis point (bp) to 3.29% after hitting 3.3090% the day before, its highest level since summer 2011.

Policy-sensitive German two-year yields DE2YT=RR were down 0.5 bps at 1.96%, while German 10-year yields DE10YT=RR fell one bp to 2.73%.

The gap between 2-year and 10-year German bond yields DE2DE10=RR tightened by one bp to 130 bps on Wednesday after widening by more than 6 bps the day before.

Italy’s 10-year yield IT10YT=RR was down two bps at 3.54%.