EURO GOVT-Bunds pause in holiday-thinned trade, data in focus

Mon May 6, 2013 3:52am EDT

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LONDON May 6 (Reuters) - German Bund futures crept higher on Monday with investors looking to euro zone data for direction in a session expected to be quiet due to a holiday in London.

After European Central Bank President Mario Draghi left the door open for more monetary easing last week, investors will look at retail sales numbers and an investor sentiment index for a pointer to the central bank's thinking on its next move.

German Bund futures were 7 ticks higher on the day at 146.22, pausing after the contract posted its biggest daily loss since early March on Friday.

"(The retail sales) gives an idea of the current environment in the euro area especially after the soft data we have seen in recent weeks," Alessandro Giansanti, senior rates strategist at ING said.

The Bund future dropped on Friday as a better-than-expected U.S. jobs data prompted investors to cash in on hefty gains. German debt had hit a record high on Thursday.

German 10-year yields were little changed at 1.24 percent, and analysts said bets for looser monetary policy would likely keep them near record lows.

German benchmark borrowing costs fell as far as 1.153 percent on Thursday, the lowest yield since July when it hit a historic low of 1.126 percent.

"We have bounced off that and I think we are going to struggle to get back to those levels," Nick Stamenkovic, bond strategist at RIA Capital Markets said, adding he also did not expect a Bund sell-off given the weak economic backdrop.

Lower-rated Italian and Spanish yields were also little change, after hitting their lowest since 2010 on Friday.

Ten-year Spanish yields rose 1.7 basis points to 4.05 percent and the Italian equivalent edged 2.2 bps higher to 3.84 percent.

"The continued grab for yield amid the accommodative stance means peripherals still remains well-supported. We think the rally in Spain has gone very far and we prefer Italy to Spain in the five-year sector," Stamenkovic added.

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