EURO GOVT-Bunds rise to day's high after healthy German auction
* Healthy demand at German auction supports Bunds * New German 5-year attracts 1.8 bid cover * Charts still painting downbeat picture for Bunds By Ana Nicolaci da Costa LONDON, Jan 9 (Reuters) - German Bund futures rose to session highs on Wednesday after a sale of new five-year debt which analysts said was well received thanks to a recent uptick in yields. Germany sold 4.09 billion euros of new five-year government bonds, drawing bids for 1.8 times the amount on offer, compared with 1.9 times at a previous auction of similar debt in November. Although the bid-cover was lower than the 1.96 average at similar sales in 2012, analysts said the pricing was strong and the tail - the difference between the lowest and the average bid - was low, indicating good demand. "What it tells us is that we are at the beginning of the year and having backed yields up somewhat in the so-called core or safe-haven market, there is money to be put to work," Marc Ostwald, strategist at Monument Securities said. German Bund futures rose to a session high of 143.72 after the auction and were last up 19 ticks on the day at 143.62. They opened lower as an upbeat start to the U.S. earnings season underpinned European stocks. In the secondary market, five-year yields were 2.2 basis points lower at 0.46 percent and ten-year yields were down 1 bps at 1.48 percent. "We seem to be holding the 1.50 level, which is obviously a key support level - (around) the upper end of recent trading range," Nick Stamenkovic, strategist at RIA Capital Markets said. Despite the rise, technical charts were painting a downbeat picture for the Bund, and Piet Lammens, strategist at KBC, said only a sustainable move above 143.75 and 143.92 would change that outlook. "If we would move sustainably beyond these two levels the picture might become more bullish for the Bund."SPAIN IN FOCUS Demand at bond sales from the Netherlands and Austria in the previous session show investors remain keen to hold safer euro zone assets even as the pick-up offered by Italian and Spanish bonds, combined with the promise of central bank intervention, has lured them back into those markets. Ten-year Spanish bond yields were 4.5 basis points higher at 5.13 percent, with bond prices coming under pressure one day before the country's first debt auction of 2013. Madrid unveiled a sizeable 121 billion euro gross funding target for the year on Tuesday - a 7.6 percent increase on the amount it raised in 2012 that highlights the country's economic plight. Spain's ability to raise funds in the market will be key in determining whether it will be forced to seek financial aid this year - a precondition for purchases of its bonds by the European Central Bank. The mere promise that the ECB will buy bonds of countries that ask for help has been enough to trigger a sharp drop in Spanish and Italian yields in recent months but some analysts say the pressure will eventually mount. "Implicit in our view is that Spain will at some point make an official request for aid to cement the progress that has been made and also the drop in yields," Elwin de Groot, senior market economist at Rabobank said. "You can argue that because the yields have fallen already to such an extent, the pressure on the Spanish government is much lower to do so but at the same time they know this is a fragile equilibrium."
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