Wires

UPDATE 2-China virus fears accelerates tumble in euro zone bond yields

Dhara Ranasinghe

* German Bund yield falls to 3-month low at -0.41%

* US 3month/10-yr yield curve briefly inverts again

* China virus fears grip world markets (Updates with German inflation data, adds chart, comment, bullets)

LONDON, Jan 30 (Reuters) - The rising death toll from a virus spreading in China sent investors scurrying for safe-haven government bonds on Thursday, pushing 10-year yields across the euro area to their lowest levels in around three months.

Several countries began isolating hundreds of citizens evacuated from the Chinese city of Wuhan in an effort to stop the global spread of an epidemic that has killed around 170.

A rising death toll and increased number of cases reported around the world have fuelled concern that China, the world's second-largest economy, may be hit hard, with repercussions for global growth.

Reflecting those worries, China's yuan tumbled in offshore markets, European stocks fell and safe-haven assets including the Swiss franc, Japanese yen and U.S. Treasuries all gained ground.

"Activity in China is being impaired whether that's factories being closed for a long period, transport being limited or people not going out so much," said Chris Scicluna, head of economic research at Daiwa Capital Markets.

"There is going to be a significant hit to growth in Q1 and that is going to have broader ramifications, for instance tourism inward and outward, will be affected."

The benchmark 10-year German Bund yield fell to a three-month low at -0.41%. French and Dutch 10-year yields hit their lowest levels since mid-October and the yields on 10-year Italian bonds sold at an auction fell to their lowest since September.

Germany's 30-year yields also fell to their lowest in around three months, at 0.095%, meaning they are less than 10 bps away from negative yield territory once again.

As 10-year U.S. Treasury yields fell to 1.55%, the lowest levels since early October, the yield curve - as measured by the gap between 10-year and three-month note yields - inverted again.

An inverted curve, when longer-dated yields fall below shorter-maturity ones, has been a fairly reliable predictor of U.S. economic recessions in the past. That part of the curve briefly inverted earlier this week.

"The coronavirus fallout is still generating plenty of worries for investors," Antoine Bouvet, senior rates strategist at ING said.

"With a longer timeframe in mind, we think this crisis has been a catalyst for a move lower in rates that would have happened anyway later in the year."

The Chinese yuan in the offshore market, considered a barometer of risk sentiment towards Chinese assets as mainland and Hong Kong markets are shut, tumbled to a one-month low below the psychologically important 7 yuan per dollar level.

Data showing inflation in German states rose closer to the European Central Bank's near-2% target in January pushed yields off their lows, but mostly played second fiddle to the China virus.

The potential impact on the world economy from the outbreak took centre stage in U.S. Federal Reserve Chair Jerome Powell's news conference on Wednesday.

Attention also turned to a Bank of England rate decision this session that is widely viewed as too close to call.

(Reporting by Dhara Ranasinghe; Additional reporting by Saikat Chatterjee Editing by Peter Graff and John Stonestreet)