German government bonds are opening higher Thursday with EMU peripheral spreads widening ahead of the EU Summit. Volumes are seen subdued ahead of month-/quarter-/half-year end tomorrow, where some estimates of quarter-end rebalancing is around $10.3bln in fixed income outflows compared to $5.4bln equity inflows. US Treasuries closed higher despite soggy $35.0bln 5-year Note auction. The 5-year note set a rate of 0.752%, with bid-to-cover ratio of 2.61 vs 2.99 at May’s sale. Indirect bidders were awarded $12.284 billion, or 35.2%, of the auction, compared with 42.6% in May. Direct bidders received 10.7%, compared with 6.5%. Dealers took 54.1% of the auction, above the long-term average of 45.5%. The 5-year later turned a profit in aftermarket trading as primary dealers redistributed new supply. In addition, dip buying came in at the lows, with the longer end of the curve turning positive, which was perhaps helped by the Fed’s $1.5bln buyback in the 30-year sector. Attention turns to Italy’s month-end BTP auctions for up to E5.5bln and US sells new 7-year notes for $29.0bln.
EasyForexNews Research Team