Euro zone bonds steadied on Thursday with longer-dated bond yields dropping slightly relative ​to shorter-dated ones after an easing in geopolitical tensions and Japanese bond market turmoil.

A plunge in Japanese ⁠bonds, as well as U.S. President Donald Trump's threats to impose tariffs as leverage to seize Greenland contributed ⁠to a ‌global bond selloff on Tuesday, particularly in longer-dated bonds. However, Trump abruptly changed stance and Japanese government bonds have also rallied for the last two sessions.

That has helped ⁠at least to put a floor under euro zone bond prices.

GERMANY'S 10-YEAR YIELD HEADS FOR FALL AFTER FIVE INCREASES

Germany's 10-year yield, the euro zone benchmark, was down just over one basis point at 2.86%, in what would be its first fall after five straight ⁠sessions of increases. Yields on super-long 30-year ​German debt, which had risen more sharply earlier in the week, fell around 2 bps to 3.49%. while the two-year ‍yield was up one basis point at 2.09%

Those "bull flattening" moves in market parlance are a reversal of the "bear steepening" situation ​earlier in the week when longer-dated yields rose while shorter-dated ones held steady or even fell, as worries about the impact of U.S. tariffs and a possible response by the EU weighed. The de-escalation over tariffs means "concerns are dialled back on euro zone inflation and GDP growth. This neutralises the 'bear steepening' trades in Treasuries and (German) Bunds," analysts at Societe Generale wrote in a note.

A less tumultuous Japanese government bond market added to the calmer mood. Super-long-dated Japanese government bond yields dropped around 6 basis points on expectations that the finance ministry could take some measures to contain further rises in ⁠yields.

Other euro zone bonds slightly outperformed the German benchmark on ‌Thursday, again reversing the moves earlier in the week. French and Italian 10-year yields were each down around 2 basis points each at 3.51%. Euro zone markets saw little immediate impact from sharp ‌moves higher in British ⁠government bond yields on speculation Andy Burnham, a rival to Prime Minister Keir Starmer, would return to the ⁠British parliament.

(Reporting by Alun John; Editing by Aidan Lewis and Barbara Lewis)