German government bonds are trading moderately lower midday Wednesday, having reversed opening gains following strong Italian auction results. Volumes were extremely thin with many players away and extending their Christmas holidays. Bunds opened higher on risk-aversion buying following overnight falls in stocks, with the 2-year Schatz yield hitting fresh EMU record low at 0.139% in opening move before coming under profit-taking pressure. The ECB said banks deposited a record E452.034bln with it overnight using the overnight loan facility, with many traders attributing this to the generous ECB allotment of 3-year funds last week. Bunds then came under pressure as EMU peripheral spreads tightened and stocks recovered. Risk-on was further aided after well received Italian auction results. Italy sold a maximum size of E9.0bln of new 6-mth T-bill at avg yield of 3.251% vs 6.504% and cover 1.691 vs 1.47 previous. Italy also sold E1.733bn in 2-yr zero coupon CTZ issue versus target size of E1.5bln-E2.5bln at avg yield of 4.853% vs 7.814% and cover 2.24 vs 1.59 previous sale.
EasyForexNews Research Team