LONDON, July 14 Reuters Global investors poured a record amount of money into European sovereign bond funds in the second quarter of the year, lured in by high yields and the prospect of interest rate cuts by the European Central Bank next year.

European sovereign bond funds attracted 15.15 billion of inflows in the April to June period, according to financial data provider EPFR, up from 10.44 billion in the previous quarter, which was then a record.

Global government bond yields have shot higher as central banks have hiked interest rates in an effort to tame a surge in inflation, making fixed income more attractive after years of low returns.

The yield on Germany39;s 10year government bond , the euro zone39;s benchmark, which traded around 2.44 on Friday, was around 0.3 just two years ago. The Italian equivalent is around 4.14.

It39;s natural to see people moving into bonds when people in general expect to see inflation decline, said Emmanouil Karimalis, macro rates strategist at UBS.

We39;ve got lots of indicators that point to negative growth, and also we are closer to the end of the hiking cycle.

Investors39; big wagers on European sovereign debt have been painful so far this year. Euro zone inflation has proven sticky and the ECB has hiked interest rates much more than expected, to 3.5, causing yields to rise and bond prices to fall.

However, many big asset managers are sticking to their bets that yields will eventually fall and prices will rise as the…