EURO GOVT-German Bunds advance on Cyprus crisis

LONDON, March 22 Fri Mar 22, 2013 3:14am EDT

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LONDON, March 22 (Reuters) - German Bund futures pushed higher on Friday as Cyprus scrambled to find a solution to a funding crisis which could see the island become the first euro zone state to exit the currency bloc.

The European Union has given Cyprus until Monday to raise the 5.8 billion euros needed to secure a 10 billion euro international lifeline or face the collapse of its financial system.

Tensions over Cyprus drove German 10-year Bunds to their lowest level this year around 1.34 percent, with some traders expecting further falls if the crisis on the Mediterranean island remains unresolved.

"Yesterday we started off with people thinking there was going to be some sort of solution. Obviously those hopes faded over the course of the day," a trader said.

"We're remaining constructive on Bunds. We still think 1.25 (percent in 10-year German yield) is a viable target for the market. The market is fairly well underpinned at the moment."

The Bund future was last 31 ticks up at 144.77, compared with 144.46 at Thursday's settlement.

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