European government bond yields fell on Thursday, as rising coronavirus cases in Europe and longer-term uncertainty kept sentiment subdued, even as equity markets were lifted by renewed hopes for U.S. fiscal stimulus. Germany’s benchmark Bund yield was down 2 basis points at -0.513%, while Portugal’s 10-year yield hit its lowest since March at 0.203%. Italy’s 10-year yield fell 3 bps, hitting its lowest since September 2019 at 0.761%. European Central Bank (ECB) vice-president Luis de Guindos, commenting on “subdued” inflation expectations in the eurozone, said that the central bank has to use all the tools at its disposal. Minutes from the ECB’s September meeting showed that policymakers argued for a “free hand” to fight the economic damage caused by the coronavirus pandemic. Daniel Lenz, the rates strategist at DZ Bank, said underlying uncertainty in markets was keeping core yields down.“ECB impact is so big that in general the spreads have a continuous downward trend and yields remain on a very low level,” he said. “I don´t see much movement for the German yield going higher than -0.50%,” he said, citing the U.S. presidential elections, Brexit uncertainty and rising COVID-19 infections in Europe, which have surged in countries including France, Germany and Poland. This followed renewed hopes on Wednesday for a U.S. fiscal stimulus package which had driven eurozone yields higher, while in the United States, Treasury prices fell and the yield curve steepened.The spread between German and U.S. 10-year yields was 129 bps, close to its widest since March. “It is still closer to crisis levels than to more normal levels, but the path that the spread is on is an auspicious one. What we want to see here is a classic U.S. recovery that helps to lift the likes of Europe in the same direction,” ING rates strategists said in a note to clients.