German government bonds are trading higher Thursday, breaking a 3-day losing streak, after periphery spreads reversed earlier tightening as the markets take stock of recent moves. Sep Bunds initially opened lower, taking cue from US treasuries and weighed by higher stocks across Asia and a weaker Yen. Also traders continued to unwind risk aversion trades amid speculation that Spain is set to receive an emergency tranche of its bank bailout programme. However, EU Commission spokesperson said no request yet received. Traders also noted a story in El Confidencial that Spain is mulling using bank bailout cash for bond purchases on the primary and secondary market by the EFSF. Spain 10-year yield spread is 4bps tighter at 501bps. Bunds then reversed losses as EMU peripheral spreads surrendered earlier tightening (except Spain), as the markets take stock of recent moves tighter, with Italy 9bps wider at +428bps. Bunds squeezed higher, inspired by gains in UK Gilts following well received 4.50% 2034 Gilt auction — sold Stg1.5bln at average yield 2.786%, covered 1.98 times and tail 0.3bps.
EasyForexNews Research Team