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EURO GOVT-Bunds steady, more peripheral stress seen
LONDON, April 15 | Fri Apr 15, 2011 2:15am EDT
LONDON, April 15 (Reuters) - German government bonds were steady at Friday's open, failing to gain traction from a renewed bout of worries over the region's highly indebted issuers which is likely to see yields for their bonds continue to head higher.
Greece will present fresh austerity and privatisation plans on Friday in an attempt to convince markets it can tidy up its finances and avoid restructuring its debt.
Moody's downgraded Ireland to Baa3, the lowest investment grade rating, from Baa1 early on Friday.
June Bund futures FGBLc1 were 3 ticks higher at 120.72.
"We're probably going to see yields drift up on the periphery but Bunds aren't getting much of a lift from it, probably because no one has positions in Greece, Ireland or Portugal anymore," said a trader.
Technical resistance comes at Thursday's high of 121.11 and last week's high of 121.23, with support at 121.29, the five-day moving average and 119.89, corresponding to the key 3.5 percent level in yields, the trader said.
Two-year bond yields DE2YT=TWEB were half a basis point lower at 1.864 percent, with 10-year yields DE10YT=TWEB little changed at 3.425 percent.
Bund underperformance has compressed the 10-year spread between German bonds and Treasuries to its lowest since late 2009 at below 0.5 basis points.
"Bunds are looking cheap on a cross-market basis," said the trader.
"We need some more hawkish rhetoric from the central bank to justify where we are versus Treasuries and Gilts."
Fears of an eventual debt restructuring pushed Greek yields up by as much as one percentage point on Thursday and weighed on the wider periphery, with Portuguese yields hitting new highs.
A final reading of euro zone inflation for March is expected to confirm a rise to 2.6 percent, keeping pressure on the ECB to tighten policy.
LONDON, April 15 | Fri Apr 15, 2011 2:15am EDT
LONDON, April 15 (Reuters) - German government bonds were steady at Friday's open, failing to gain traction from a renewed bout of worries over the region's highly indebted issuers which is likely to see yields for their bonds continue to head higher.
Greece will present fresh austerity and privatisation plans on Friday in an attempt to convince markets it can tidy up its finances and avoid restructuring its debt.
Moody's downgraded Ireland to Baa3, the lowest investment grade rating, from Baa1 early on Friday.
June Bund futures FGBLc1 were 3 ticks higher at 120.72.
"We're probably going to see yields drift up on the periphery but Bunds aren't getting much of a lift from it, probably because no one has positions in Greece, Ireland or Portugal anymore," said a trader.
Technical resistance comes at Thursday's high of 121.11 and last week's high of 121.23, with support at 121.29, the five-day moving average and 119.89, corresponding to the key 3.5 percent level in yields, the trader said.
Two-year bond yields DE2YT=TWEB were half a basis point lower at 1.864 percent, with 10-year yields DE10YT=TWEB little changed at 3.425 percent.
Bund underperformance has compressed the 10-year spread between German bonds and Treasuries to its lowest since late 2009 at below 0.5 basis points.
"Bunds are looking cheap on a cross-market basis," said the trader.
"We need some more hawkish rhetoric from the central bank to justify where we are versus Treasuries and Gilts."
Fears of an eventual debt restructuring pushed Greek yields up by as much as one percentage point on Thursday and weighed on the wider periphery, with Portuguese yields hitting new highs.
A final reading of euro zone inflation for March is expected to confirm a rise to 2.6 percent, keeping pressure on the ECB to tighten policy.
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