* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Adds detail.)
By Virginia Furness
LONDON, March 22 (Reuters) – Germany’s 10-year government bond yield was poised to turn negative for the first time since October 2016 after data showed German manufacturing had contracted for the third straight month, renewing concern about a slowdown in Europe’s biggest economy.
The 10-year bond yield slid over three basis points and was last at 0.00 percent.
“The narrative behind it isn’t a big surprise … But the size of surprise is fairly material. These things happen very rarely, and the surprise is what matters the most for market activity,” said Antoine Bouvet, rates strategist at Mizuho.
Bouvet said he would not be surprised if Germany’s 10-year turned negative in this session.
IHS Markit’s flash composite Purchasing Managers’ Index measuring activity in German services and manufacturing, which together account for more than two-thirds of the economy, fell to 51.5, it lowest reading since June 2013.
The German 10-year yield last hit zero percent on Oct. 21, 2016, when Mario Draghi dispelled market concerns about tapering and said the ECB remained committed to its asset purchase programme.
Other euro zone bond yields also fell sharply, with France’s and Spain’s 10-years down nearly four basis points.
Reporting by Virginia Furness, editing by Larry King