German government bonds are lower Wednesday, amid compression in EMU peripheral spreads following market talk that ESM funds will be used to buy peripheral debt in the secondary market. However, Bunds are off their worst levels on back of gains in UK Gilts after Bank of England minutes for the June meeting revealed King, David Miles and Adam Posen all voted for an extra Stg50 billion in QE, with Executive Director Markets Paul Fisher voting for a further Stg25 billion. There was discussion over cutting Bank Rate from 0.5%, but the MPC voted nine to zero against it, arguing that at present it had no advantages over more QE. Sep Bunds opened lower, extending weakness from the previous session following talk that ESM funds will be used to buy peripheral debt in the secondary market. This speculation came despite comments from the German government that reaffirmed that the European bailout funds EFSF and ESM won’t be able to buy bonds of EMU member states on the secondary markets without these countries applying formally for such aid and accepting the conditions tied to it.
EasyForexNews Research Team