German government bond opened moderately lower Wednesday on profit-taking following recent risk-aversion bid, but have since reversed direction as risk-off sentiment continues to prevail, amid political uncertainty in Greece. In addition, widening in Spanish spreads also noted ahead of the potential state rescue of Bankia, which is reportedly being lined up on Friday, where recent press reports suggest size of bailout to be between E7.0bln-E10.0bln. Spain 10-year yield spread is 8bps wider at +436bps. Italy 10-year yield spread is 5bps wider at +413bps ahead of Friday’s T-bill auctions for up to E10.0bln. The benchmark 10-year Bund hit a fresh record low at 1.531% yesterday, with bulls eyeing move to 1.50% psychological level, which is seen coinciding around 142.90 level on June Bund futures contract. Attention turns to the German new 5-year benchmark 0.50% Apr 2017 Bobl auction for up to E5.0bln. Also eyed are comments from Italy PM Monti, German FinMin Schaeuble, EU Van Rompuy, Barroso and EFSF Chief Regling and meeting of EU Juncker with France President Elect Hollande.
EasyForexNews Research Team