German government bonds are opening lower Thursday and extending strong sell-off in the bond market from the previous session, as risk-on sentiment continue to prevail. The benchmark 10-year Bund has so far found support ahead of the 2.00% yield level, but risks remain skewed lower as jitters in the UK Gilts market continue to dominate after Fitch Ratings late Weds revised UK’s outlook to negative from stable, whilst re-affirming its AAA rating. June Gilts have so far hit fresh contract low at 112.46 at the open, with most traders dismissing the Fitch move as playing catch-up to similar move by Moody’s last month and a delayed response to the increase in debt over the past year. However, most of the Fitch report actually praises the UK government’s effort in reducing the government’s structural budget deficit. Attention now turns to the UK DMO’s re-opening auction of the 4.50% Dec 2042 Gilt for Stg2.0bln, , where Gilts have come under huge selling pressure on news that the UK is considering to sell a new 100-year Gilt. Ahead of this, Spain & France come to the market with supply in region of E12bln.
EasyForexNews Research Team