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Bond yields fall when prices rise. In Germany case, yields have crashed. The yield on the country 10 year benchmark bond has almost halved this year, dipping below Black Adidas Tracksuit Orange Stripes

Hoodies Adidas Originals

This year plunge in Bund yields the 10 year bond yielded 1.9 per cent at the start of the year has outstripped even a hefty and unexpected rally in US debt. The 10 year US Treasury bond currently yields 2.41 per cent, down from roughly 3 per cent. There is little enthusiasm for such paltry yields from investors, many of whom entered 2014 betting that safe harbor bonds would falter as global growth picked up. But many retain a preference for German debt, given the likelihood that central banks including the Fed and the Bank of England will soon have to contemplate rate rises as economic growth gathers pace.

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"Russia and Ukraine have clearly had a major impact on global bonds, and the Bund market is more sensitive to a safe haven rally than other markets," said Steve Cohen, head of international fixed income at BlackRock, which manages $US4.32 trillion.

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Even with returns at such slender levels, most investors aren balking, and some expect Bunds persistent rise to keep boosting other bonds in their wake.

"We in a situation where you have ultralow interest rates as far as the eye can see," Mr Dowding said, adding that BlueBay favors Bunds in its portfolios relative to US and UK debt, due to the brighter economic prospects in those countries that may prompt their central banks to raise rates soon.

For some investors, German yields are simply too low. But few are expecting a sharp rise soon.

Hoodies Adidas Originals

Hoodies Adidas Originals

Nerves over Russia and a shrinking German economy are making steady, super reliable German government bonds a red Adidas Hoodie Burgundy

Hoodies Adidas Originals

Hoodies Adidas Originals

sufficiently weak to cement the ECB supportive stance.

Hoodies Adidas Originals

hot investment.

BlackRock Mr Cohen said the firm prefers Bunds to Treasurys or UK gilts.

"With data like [Thursday GDP numbers], Hoodies Adidas Originals eurozone bond yields can decouple from the US and UK," said Andrew Bosomworth, the firm head of portfolio management in Germany.

"Bunds feel like something of a dark star at the center of the fixed income universe. We see them exerting a gravitational pull on other yields and credit spreads as investors look for yield elsewhere," said Mark Dowding, co head of investment grade debt at BlueBay Asset Management, which manages $US66.6 billion.

The gap in debt yields between these eurozone countries and Germany can narrow further despite the setback in eurozone GDP, according to Ms Allier. Growth rates in the currency bloc remain strong enough to prevent a reprise of the eurozone debt crisis, but Adidas Skirt

"I won be buying Bunds at 1 per cent not because I don think yields could go a bit lower. But even if you think they will I believe you better off buying the Netherlands, Belgium, Spain or Italy [for the higher yields they offer]," said Marie Anne Allier, head of euro aggregate bond management at Amundi, which manages billion of assets.

´╗┐German govt bonds hit record highs

Sanctions and tensions with Russia have also scared investors into the safety and liquidity of Bunds and crimped the German economy further.

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"In absolute terms yield levels everywhere are unfathomable," he said.

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With US interest rates expected to rise in 2015 or 2016 as the ECB stays on hold, "being in German debt isn such a bad thing," said Erik Weisman, global bond portfolio manager at MFS Investment Management, which has $US429.7 billion under management. Mr Weisman prefers eurozone debt to Treasurys. In the first half of 2014, MFS focused on bonds issued by former crisis spots like Italy and Spain, but as those countries yields have fallen it has increasingly shifted into German debt.

"Everybody was expecting a slowdown in the second quarter, and it been a little bit worse than expected. But it still consistent with growth of just over 1 per cent in the eurozone for the year as a whole," she said.

That view is shared by fellow fixed income giant Pimco, which said the gap between Bunds and the rest can grow.

Driving the long running rally further, Thursday data showed Germany economy, the biggest in the euro area, contracted by 0.2 per cent in the second quarter of this year, capping a wave of disappointing economic data that has swept over the currency bloc in recent weeks. The slowdown piles further pressure on the European Central Bank which unveiled a package of easing measures in June to hold interest rates at record lows for years to come and even consider more radical policies, such as a US Fed style program of asset purchases known as quantitative easing, all of which would support the Bund further.

1 per cent for the first time in history on Thursday, showing that these bonds are more in demand than they were even in the depths of the eurozone debt crisis. Only Japan, famous for its wafer thin yields, offers more meager returns on long dated government debt.

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