EURO GOVT-Bunds hit session high on ECB deposit rate cut talk

Fri May 17, 2013 7:05am EDT

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LONDON May 17 (Reuters) - German Bund futures extended gains on Friday with traders citing market talk that the European Central Bank had checked some banks' preparedness to handle a potential cut in its deposit rate to below zero.

The ECB had no immediate comment.

"We're hearing the ECB has been checking that banks are set up to have negative rates, which I don't think would be a surprise for anyone if they are," one trader said.

"I think it is probably still the easiest of policy options (in terms of) unconventional measures. If we do get some sort of deterioration I think it's likely we get negative rates and it's giving Bunds a bit of a bid today."

The Bund future rose as much as 40 ticks to 145.71.