EURO GOVT-Bunds fall as Moody's affirms Spain's sovereign rating

LONDON Wed Oct 17, 2012 2:13am EDT

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LONDON Oct 17 (Reuters) - German Bund futures fell on Wednesday after Moody's decision to keep Spain's investment grade rating cooled demand for safe-haven government bonds.

Spain's government dodged a bullet on Tuesday when Moody's Investors Service affirmed its Baa3 rating, with a negative outlook, assuaging widespread fears that the country would be cut to a junk rating.

German Bund future fell 23 ticks to 140.54, extending the previous day's losses, when the contract saw its biggest one day fall in more than a week.

Moody's decision should provide a favorable backdrop to an auction of Spanish government bonds on Thursday by removing an immediate threat to the euro zone's fourth largest economy.

"Maybe Spain gets a bid but they still have got supply tomorrow," one trader said. "It will probably go OK. "

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