EURO GOVT-Bunds rise, tension high as Cyprus reopens banks

LONDON, March 28 Thu Mar 28, 2013 3:10am EDT

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LONDON, March 28 (Reuters) - German government bond futures rose on Thursday with investors' attention focused on Cyprus where banks open for the first time in nearly two weeks, facing fears of a run on deposits with wider implications.

Cyprus's rescue plan is the first in the euro zone to impose losses on bank depositors and has prompted Cypriot authorities to impose strict controls on the amount of cash that can leave the island state.

The risk that depositors in other countries could take fright at any sign of long queues at Cypriot banks and start withdrawing their own cash kept demand for low-risk German debt high, although analysts said a cross-border bank run was not expected.

German Bund futures rose 11 ticks to 145.63, within sight of the March 4 high of 145.80. Any break above that level would see Bunds at their highest since late December. Ten-year Bund yields were 0.5 basis points lower on the day at 1.27 percent.

"We see further downside in Bund yields as investors will keep risks light and opt for safety ahead of the Easter break," Commerzbank strategists said in a note.

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