EURO GOVT-Bunds steady, Italy uncertainty offers support

LONDON Mon Feb 25, 2013 2:16am EST

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LONDON Feb 25 (Reuters) - German Bund futures held near one-month highs on Monday with uncertainty over the outcome of the ongoing Italian elections expected to keep demand for low-risk assets high.

The Bund future was 9 ticks lower at 143.53, hanging on to most of the sharp gains made late last week when a combination of weak data and election nerves pushed the contract out of its trading range to the highest level since Jan. 25.

The market was expected to remain cautious until later in the day when the first exit polls emerge from Italy. The election has been closely contested, with a surge in protest votes adding to investors' concerns that the ballot may result in a weak and fragmented government.

"We're sitting here waiting for Italian news. The question is how much of the protest vote has there been ... you can argue the more of it that there is, the more likely there's going to be split houses or weak coalitions," a trader said.

Italian debt futures were 16 ticks higher on the day at 111.98.

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