German government bonds trading higher Monday, but off their best levels as Italy 10-year spread reverses earlier widening move and after traders dismissed talk of Portuguese debt restructuring. Mar Bund futures contract opened higher on risk-aversion buying on continued uncertainty surrounding Greece after PM Papademos and the leaders of three political parties failed to reach agreement on Sunday evening. Talks are expected to resume today. Flight-to-quality buying was also seen on increased talk that Portugal will also have to restructure its debt. A spokesman at Lazard & Co., declined to comment to MNI that it has been hired by the Portuguese government. Portuguese 10-year OT yield spread widened to +1353bps before paring move to +1338bps or just 13bps wider on session, as traders dismissed talk that Lisbon will go the same route as Greece. Bunds also pared gains as Italy 10-year yield spread reversed earlier widening in absence of any ECB buying. Traders attributed the Italian spread reversal to real money buying that are underweight BTPs. Italy 10-year spread was last 2bps tighter at +373bps.
EasyForexNews Research Team