German Bunds suffer a rocky Friday but stay off 0%

German Bund yields accelerated declines Friday, to trade just above zero percent, as investors eyed a move into negative territory.

Yields on benchmark 10-year Bunds fell as low as 0.051 percent, from a close of 0.085 percent on Thursday, before pushing back up.



Yield declines started accelerating from Tuesday this week, before falling sharply on Friday. This has led to speculation that Germany could become the first euro zone country to have 10-year bond with a negative yield.

"Really, today could be well be the day (that yields turn negative)," Jennifer McKeown, European economist at Capital Economics, told CNBC Friday.

Bunds are viewed as a "safe-haven" asset, akin to the U.S. dollar, and prices have steadily rallied since the start of 2014. (Bond prices move inversely to yields.)

The sudden slump in Bunds on Friday was part of a broader market downturn, with all major euro zone stock indexes down 1 percent or more. The pan-European Stoxx Europe 600 traded around 1.4 percent lower.

Nonetheless, Marc Ostwald of ADM Investor Services International, did not see Bunds crossing into negative territory on Friday.

"To get to the zero day, we are probably going to need equities to fall quite a lot further and some sense of fear that the Greece situation might go wrong horribly... It is going to be Chinese water torture," the strategist told CNBC.

Earlier this week, U.S. investment bank Goldman Sachs said that negative yields had become the "new normal" in the region. Over 2 trillion euros ($2.1 trillion) of outstanding euro zone sovereign debt now has a negative yield, according to calculations by the bank.

Switzerland—which is not part of the euro zone—became the first government in history to sell a benchmark 10-year sovereign bond at negative interest rates last week, according to the Financial Times.

Ostwald said that the decline in Bund yields was so sharp that it was dragging down U.S. Treasury yields. Benchmark 10-year Treasury bonds yielded 1.858 percent on Friday, down from a close of 1.878 percent on Thursday.

CNBC's Matt Clinch contributed to this report.