EURO GOVT-Bunds inch up with periphery seen weak

LONDON Tue Feb 12, 2013 2:11am EST

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LONDON Feb 12 (Reuters) - German Bund futures edged up at the open on Tuesday as investors fretting about political uncertainty in Italy and Spain propped up demand for low risk debt.

Focus remains on peripheral euro zone bonds where trade has been volatile over the past week on mounting concern about former Italian Prime Minister Silvio Berlusconi's comeback in polls before elections at the end of the month. In Spain, Prime Minister Mariano Rajoy is facing calls to resign over a corruption scandal, in which he denies any wrongdoing.

Bunds shrugged off news that North Korea likely conducted a nuclear test, with focus on developments in the euro zone.

European Central Bank President Mario Draghi will be back in the spotlight when he speaks to Spanish lawmakers later on Tuesday to explain and defend the ECB's current monetary policy strategy - an event which may gain prominence given heightened concerns about the appreciation of the euro.

"(Draghi) might come up and give them (the Spanish government) a pat on the back. But we still maintain that (negative) stance on the periphery with Italian elections getting closer," a trader said.

The Bund future was last 11 ticks up at 142.96 compared with 142.85 at Monday's settlement.

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