German government bonds are opening lower Wednesday ahead of the new 30-year Bund auction for E3.0bln. Volumes are seen light as players await the FOMC meeting outcome and press conference with Federal Reserve Chairman Ben Bernanke later this session. The move comes lower in June Bund futures lower comes after profit-taking yesterday and return of risk-on sentiment following decent demand at Dutch bond and Spanish T-bill auctions. Elsewhere, switch trades out of Italian bonds into Spanish bonds was also reported after cost of borrowing at 2-year zero coupon CTZ auction rose 100bps and demand fell from the previous auction on Mar 27. The 10-year Spanish/Italian yield spread turned negative for the first time since March 12. In addition, switching out of Gilts was reported after the UK Debt Management Office (DMO) announced that it plans to reduce Gilt sales by Stg3.3bln to Stg164.4lbn. In addition, Gilts also gained following strong demand at the syndicated re-opening of the 3.75% 2052 Gilt that was priced for Stg4.5bln at +2.5bps versus 2049 Gilt.
EasyForexNews Research Team