German government bonds are mixed Friday with the yield curve flatter on duration extension buying, according to traders. Bunds opened higher on weaker European stocks open amid a continuing impasse over Greek debt swap talks. Also underpinning Bunds is news that German total tax revenue (excluding local taxes) was 4.1% higher on the year in December. For the full year, it rose by 7.9%, surpassing the government’s forecast of +7.5%, according to the German Finance Ministry. Mar Bunds then came under selling pressure on EU Rehn comments — just about to close deal on Greece private sector development & Greece PSI deal may be reached today or over weekend. Bunds then staged a bounce, led by the long-end on talk of month-end duration extension buying. The BarCap Euro Treasury extension is +0.13 years. Elsewhere, EMU peripheral spreads are mixed, with Italy trading tighter following earlier talk the ECB was buying 5-year & 7-year BTPs, albeit small size and extended move after successful Italian T-bill auctions. Italy 10-year yield spread earlier broke below the +400bps level vs Bunds.
EasyForexNews Research Team