Euro zone bond yields edge down with focus on new COVID-19 cases

German 10-year bond yields approached three-week lows in early trade on Monday as markets focused on worries around a second wave of coronavirus infections.

Follow live updates on the COVID-19 pandemic here

Beijing reported its second consecutive day of record new numbers of COVID-19 cases on Monday, all linked to a major wholesale food market.

That adds to investor fears over a spike in cases in the United States where several states have reported a record number of new cases in recent days, overturning optimism across global markets that had been partly fuelled by the gradual lifting of lockdowns implemented to curb the spread of the virus.

Stocks took another hit on Monday while safe-haven bonds benefited, echoing moves last week when fears over a second wave of infections first came to the forefront. In the euro zone bond market, that put an end to weeks of trading which had seen safe-haven German bond yields rise relative to those of riskier Southern European borrowers.

"Concerns about rising numbers of Covid-19 cases in some countries and states should remain top of the agenda, and with it the scope for more downside to core rates across the world," ING analysts told clients.

"True the surprise effect might have worn off, but political wrangling around the re-implementation of lockdown measures would sow doubts about states’ ability to flatten the epidemic curve."

Germany's 10-year bond yield was near three-week lows at -0.47%, down 2 basis points on the day after notching its best week since February last week, when it fell 18 bps..

Italy's 10-year bond yield was down 1 basis point to 1.41% .

On Friday ratings agency Fitch affirmed Spain's "A-" rating and Germany's "AAA" rating, both with stable outlooks.