RPT-EURO GOVT-Bunds stabilise as doubts over ECB action set in
LONDON, July 31 (Reuters) - German Bund futures held steady in early Tuesday trade, as scepticism set in over the European Central Bank's ability to take bold action this week to back up a pledge to lower Spain and Italy's borrowing costs.
Spanish yields have tumbled a full percentage point from euro era peaks of 7.7 percent hit early last week, after ECB President Mario Draghi pledged that the central bank was ready to do whatever it took to safeguard the euro.
This sparked hopes that central bank could revive its bond purchase programme, mothballed for months, at its rate setting meeting on Thursday, sending safe-haven Bunds tumbling.
The rally was showing signs of running out of steam on caution before the ECB's rate setting meeting on Thursday.
"There's a bit of scepticism and wondering if maybe Draghi overpromised. Thursday is going to be very interesting to see what's actually said," a trader said.
"The risks for disappointment for the periphery are quite high if we don't see anything particularly substantial from the ECB and we could see the sharp fall in yields reverse."
The Bund future was up 6 ticks on the day at 143.45 having slipped six ticks at the open to 143.33 while German 10-year cash yields were steady at 1.37 percent.
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