German government bonds are opening lower Tuesday following improvement in risk-sentiment overnight after China GDP data and post S&P downgrade of the EFSF rating from AAA to AA+. However, Bunds are seen underpinned by continued eurozone sovereign debt jitters where Portuguese yield spreads after S&P downgraded its rating 2 notches into junk to BB, and joins Fitch & Moody’s in non-investment grade category. Markets now see Portugal likely to go the same way as Greece and have to restructure debt and Lisbon will require another bailout or potentially a PSI deal. Attention this morning turns to German ZEW business survey, daily ECB liquidity data, ECB conducts its regular 7-day MRO, 1-maintenance period STRO and 1-week liquidity draining operation. In addition, there is a heavy slew of bill issuance this morning, with Belgium, Greece, Spain and the EFSF are due to come the market for up to E11.0bln indicative size. Also eyed are comments from Italy’s Monti meeting with UK Cameron. EU President Van Rompuy meets Spain PM Rajoy in Madrid. Quarterly earning results are due from Citigroup & Wells Fargo.
EasyForexNews Research Team