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Bund futures should find technical support at the year's low of 137.70 while the rise in cash market yields could be limited by the psychological 2 percent barrier. Ten-year German bond yields <DE10YT=TWEB> rose 7 bps on the day to 1.93 percent. Even a smooth implementation of the debt swap would not necessarily ease the outlook for Greece and see investors abandon their heavy investment in low-return, but safe and liquid German Bunds. "We would argue the continued shrinkage of Greek GDP has the potential to rapidly erode any advantage the state hopes to gain from the proposed haircuts. As such, this could well be the first rather than last restructuring effort," said Rabobank strategist Richard McGuire. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Euro zone debt crisis in graphics (package) http://r.reuters.com/hyb65pnn Global government yields Government 10 year bond yields and ratings Euro zone credit ratings http://r.reuters.com/pyh48r Euro zone sovereign debt supply outlook 2012 EZ_SVDBTSP1211_VF.swf ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ PERIPHERY POSITIVE Beyond Greece, lower-rated euro zone bonds outperformed German debt. Italian 10-year yields <IT10YT=TWEB> were 9 basis points lower on the day at 6.3 percent, extending their sharp fall from levels above 7 percent seen two weeks ago. Spanish yields also fell, reflecting the positive sentiment prompted by the ECB's huge injection of cash into the banking sector - some of which has been used to buy peripheral debt and has helped support recent bond auctions. Portuguese debt was steady on the day despite concerns that the country could fall victim to contagion from any Greek deal. Although Lisbon sealed a labour reform deal this week, some are wary that Greek debt writedowns could be used as a template for solving Portugal's debt problems.[ID:nL6E8CJ48D][ID:nL6E8CK15U] The outperformance in peripheral debt could continue next week, analysts said, in the absence of any long-term bond supply pressure from the region's lower-rated states. Germany and the Netherlands dominate next week's supply schedule, with Italian sales of zero-c
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