EURO GOVT-Bunds dip after equity rally, auction eyed

LONDON Wed Feb 20, 2013 2:14am EST

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LONDON Feb 20 (Reuters) - Bund futures opened lower as resurgent appetite for equities overnight weighed on demand for lower-yielding bonds, with Wednesday's focus falling on a German 10-year debt sale.

German Bund futures fell 25 ticks in early trade to 142.57, well within the recent 143 to 142 range, but heading lower after U.S. and Asian stock markets rallied on expectations of faster economic growth and a pick-up in merger activity.

European investors are expected to be cautious in the run-up to an Italian election on Feb. 24-25, limiting the scale of falls in safe-haven Bunds and providing support for an auction of 10-year German debt due around 1030 GMT.

"The supply should get done all right today, I don't think demand will be spectacular but I'm sure it will go. Tomorrow's a bit more interesting with Spain and France... you'd think we'd try and put in a little bit of a concession ahead of that," a trader said.

On Thursday Spain will sell up to 4 billion euros of bonds while France offers up to 10.5 billion euros of fixed-rate and inflation-linked debt.

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