EURO GOVT-Bunds rise, peripherals seen vulnerable to more selling

LONDON Mon Feb 11, 2013 2:13am EST

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LONDON Feb 11 (Reuters) - German Bunds rose on Monday, with market participants saying a sell-off in lower-rated debt had further room to run due to ongoing political uncertainty in Spain and jitters before an Italian vote this month.

Analysts were not expecting much new from a euro zone finance ministers meeting later in the day, where the strength of the euro is likely to be discussed before a G20 meeting at the end of the week.

A peripheral bond rally paused last week as Spanish Prime Minister Mariano Rajoy faced calls to step down over corruption allegations and another scandal involving Monte dei Paschi bank fuelled political uncertainty before Italian elections.

German Bund futures were 10 ticks higher at 142.93.

"We need the Italian elections behind us and we need some comfortable news about the corruption charges in Spain before we can get a sustained outperformance of these two markets," Piet Lammens, strategist, at KBC said.

But he expected the sell-off to be temporary over the medium-term.

Trade could be thinned with most Asian bourses, including those in Japan, China, Hong Kong, Singapore and South Korea, closed for the Lunar New Year holiday.

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