EURO GOVT-Bunds fall after Fed announces new bond-buying plan

LONDON Thu Dec 13, 2012 2:12am EST

Related Topics

LONDON Dec 13 (Reuters) - German debt futures fell at Thursday's open, tracking a decline in U.S. bonds sparked by the announcement of fresh stimulus by the Federal Reserve that, although anticipated, dented demand for safe haven assets.

The Fed said it will buy $45 billion in Treasuries each month and will expand its purchases to five-year notes from the current seven-, 10- and 30-year bonds.

The Fed also took the unprecedented step of saying it would keep interest rates near zero until the jobless rate falls to 6.5 percent, well below its current level, so long as inflation is contained.

"Perhaps there's some mild disappointment that they've shifted the maturities of what they're buying and dropped the 'rates low forever' language and are looking at it more qualitatively," a trader said.

Bund futures slipped 27 ticks to 144.99, a less severe fall than that seen in U.S. debt futures which were trading around half a point lower compared to levels before the Fed announcement.

Focus during the European session will be on debt sales from peripheral states Italy and Spain. Both were expected to find demand but the strength of bidding will be closely watched for clues on how willing investors will be to support the debt-laden sovereigns in 2013.

FILED UNDER:
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.