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EURO GOVT-Greek yields continue to rise, Bunds edge up
Tue Apr 26, 2011 4:38am EDT
* Greek debt suffers on persistent restructuring worries
* Charts show growing positive momentum for Bund futures
* Markets eye Spanish T-bill sale
By William James
LONDON, April 26 (Reuters) - Investors continued to shun Greek debt on Tuesday over escalating concerns the country would restructure its debt, while safe-haven Bund futures crept higher with technical charts pointing to further gains.
Investors continue to price in a growing probability that Greece will need to restructure its debt -- despite EU and Greek officials dismissing the idea -- pushing the country's credit default swaps and short-dated yields to their highest since the launch of the euro zone.
The 10-year Greek yield rose to 15.47 percent, up 41 bps on the day, with the paper trading at 56.3 percent of its face value GR10YT=TWEB. Greek credit default swaps rose 37 basis points to 1,340 bps.
Traders, however, said there was little flow behind the price moves.
"No-one sees a reason for (yield spreads) to tighten, with volumes so low... There's no natural buyer (of Greek debt) of any size in terms of these markets right now," a trader said.
"The only potential buyer is the European Central Bank but the ... relatively random talk that is coming out on restructuring doesn't help the situation (so) the ECB won't buy whilst (some other euro zone countries) continue to speak and put pressure on Greece to restructure."
Investors will watch Spain's sale of three- and six-month Treasury bills later in the session for signs of weakness after peripheral debt came under pressure across the board last week.
Analysts saw little risk of low demand for the paper, though yields are expected to rise from a similar sale last month as unease about the euro zone's weaker economies continues to drive markets that are also pricing in more ECB rate hikes.
"The contagion effect we saw last week is, I think, going to be short lived. Spain should be treated differently to the other three peripherals (Greece, Ireland and Portugal)," said Nick Stamenkovic, strategist at RIA Capital Markets.
BULLISH TONE
The Bund future FGBLc1 was last at 122.44, 13 ticks higher than Thursday's close, taking its direction from gains made by U.S. Treasuries on Monday when European markets were closed, though traded volumes remained well below average. Risk aversion in the euro zone bond market has lifted safe-haven German Bund futures by over 2 full points since April 11, leaving technical charts signalling room for further gains.
"Statistically, Bund sentiment has reached the most positive levels in eight months with a strong percentage of new highs versus lows indicating investors' increasing willingness to pay higher prices," said PIA First director Max Knudsen.
The outlook for Bunds was cautiously bullish while above their recent rising trendline at 121.73, Knudsen said, adding the contract could test last week's high of 122.65.
The main event for core government bond markets was the U.S. Federal Reserve's policy meeting beginning later in the session and concluding on Wednesday.
However, with expectations of a significant change in policy signals very low, investors were reluctant to take positions on any further spillover into euro zone markets from the Treasury market.
Ten-year German Bund yields DE10YT=TWEB 1.2 basis points lower on the day at 3.253 percent -- around 12 basis points lower than equivalent Treasury yields.
***
Uno sguardo ad ampio raggio ...
Tue Apr 26, 2011 4:38am EDT
* Greek debt suffers on persistent restructuring worries
* Charts show growing positive momentum for Bund futures
* Markets eye Spanish T-bill sale
By William James
LONDON, April 26 (Reuters) - Investors continued to shun Greek debt on Tuesday over escalating concerns the country would restructure its debt, while safe-haven Bund futures crept higher with technical charts pointing to further gains.
Investors continue to price in a growing probability that Greece will need to restructure its debt -- despite EU and Greek officials dismissing the idea -- pushing the country's credit default swaps and short-dated yields to their highest since the launch of the euro zone.
The 10-year Greek yield rose to 15.47 percent, up 41 bps on the day, with the paper trading at 56.3 percent of its face value GR10YT=TWEB. Greek credit default swaps rose 37 basis points to 1,340 bps.
Traders, however, said there was little flow behind the price moves.
"No-one sees a reason for (yield spreads) to tighten, with volumes so low... There's no natural buyer (of Greek debt) of any size in terms of these markets right now," a trader said.
"The only potential buyer is the European Central Bank but the ... relatively random talk that is coming out on restructuring doesn't help the situation (so) the ECB won't buy whilst (some other euro zone countries) continue to speak and put pressure on Greece to restructure."
Investors will watch Spain's sale of three- and six-month Treasury bills later in the session for signs of weakness after peripheral debt came under pressure across the board last week.
Analysts saw little risk of low demand for the paper, though yields are expected to rise from a similar sale last month as unease about the euro zone's weaker economies continues to drive markets that are also pricing in more ECB rate hikes.
"The contagion effect we saw last week is, I think, going to be short lived. Spain should be treated differently to the other three peripherals (Greece, Ireland and Portugal)," said Nick Stamenkovic, strategist at RIA Capital Markets.
BULLISH TONE
The Bund future FGBLc1 was last at 122.44, 13 ticks higher than Thursday's close, taking its direction from gains made by U.S. Treasuries on Monday when European markets were closed, though traded volumes remained well below average. Risk aversion in the euro zone bond market has lifted safe-haven German Bund futures by over 2 full points since April 11, leaving technical charts signalling room for further gains.
"Statistically, Bund sentiment has reached the most positive levels in eight months with a strong percentage of new highs versus lows indicating investors' increasing willingness to pay higher prices," said PIA First director Max Knudsen.
The outlook for Bunds was cautiously bullish while above their recent rising trendline at 121.73, Knudsen said, adding the contract could test last week's high of 122.65.
The main event for core government bond markets was the U.S. Federal Reserve's policy meeting beginning later in the session and concluding on Wednesday.
However, with expectations of a significant change in policy signals very low, investors were reluctant to take positions on any further spillover into euro zone markets from the Treasury market.
Ten-year German Bund yields DE10YT=TWEB 1.2 basis points lower on the day at 3.253 percent -- around 12 basis points lower than equivalent Treasury yields.
***
Uno sguardo ad ampio raggio ...