EURO GOVT-Bunds edge up as Spanish uncertainty drags on
LONDON Oct 2 (Reuters) - German government bonds rose at Tuesday's open, helped by uncertainty over when Spain may ask for financial assistance.
European officials told Reuters on Monday that Spain was ready to request a bailout as early as next weekend but Germany had signalled it should hold off.
In addition, markets are waiting on the outcome of a credit rating review by Moody's which could see Spain lose its investment grade rating, something that would likely trigger a new round of selling of its bonds.
"A Moody's downgrade for Spain could tip the balance for lower 10-year Bund yields towards 1.3 percent," Commerzbank strategists said in a note. "However we see the odds slightly in favour of a rating confirmation and thus expect to see some relief in the periphery."
December Bund futures were 26 ticks higher at 141.66.
"There's ongoing speculation about when Spain will ask for a bailout...it doesn't feel like it's that close yet...it's just dragging on," a trader said.
"Positioning is pretty square and it doesn't seem like there's any real conviction in what the next big trade is....but there's a recession coming...so we expect the front-end, especially five-years to be quite well supported."
Austria will kick off the week's new issuance, selling 1.3 billion euros of 2019 and 2044 bonds.
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