German government bonds trading moderately higher Wednesday having recovered opening weakness amid caution over a Greek debt/bailout deal. News that today’s Eurogroup meeting will now be done via teleconference, and comments from Greek FinMin saying “there are still outstanding issues to be addressed”, suggests any decision on the second Greek aid package will be deferred until Monday’s eurozone FinMin meeting. Traders also reported stop loss buying in Mar Bunds mid-morning along with switch trades out of UK Gilts into Bunds following the Bank of England Quarterly Inflation Report, where the MOC hiked its inflation projections, showing it only just undershooting target two years ahead. EMU peripheral bond yield spreads are trading flat to wider with Greece leading the underperformance – 10-year Greek yield spread is 72bps wider at +3495bps. Spain is still licking wounds after Moody’s 2 notch downgrade to A3 and negative outlook. Portugal is outperforming after the IGCP sold a combined size E3.0bln worth of 3-/6-/12-month T-bills at the top end of a target range of E2.5-E3.0bln & good quality demand.
EasyForexNews Research Team