EURO GOVT-Bunds fall as investors pause before Spanish sale, ECB

LONDON, July 4 Thu Jul 4, 2013 2:26am EDT

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LONDON, July 4 (Reuters) - German Bund futures edged lower on Thursday as investors paused after a sharp rally, reluctant to place big bets before a Spanish debt auction and a European Central Bank meeting.

A political crisis in Portugal led investors to favour safe-haven debt over riskier paper on Wednesday, driving 10-year Portuguese yields briefly above 8 percent.

That makes for a difficult backdrop to Spain's bond auction this session, but analysts said the sale should be supported by demand from domestic investors while the recent rise in borrowing costs could also be enticing.

The sharp market moves rekindled concerns about the euro zone debt crisis, and investors will look to ECB President Mario Draghi's press conference after a monetary policy meeting this session for reassurance.

"After what happened in Portugal, he has no reason to sound more hawkish, on the contrary, he might continue to say that an exit policy for the ECB is still in the very distant future," Piet Lammens, strategist at KBC.

German Bund futures were 15 ticks lower at 142.11 as European stock futures pointed to a higher open.

Trade is likely to be thinned by a public holiday in the United States.

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