Bunds fall with U.S. Treasuries on Summers Fed talk
* Report says Obama close to naming Summers as Fed chief
* Bund losses seen limited before U.S. retail sales
* All eyes on next week's Fed meeting
By Emelia Sithole-Matarise
LONDON, Sept 13 (Reuters) - German Bunds fell on Friday with U.S. Treasuries on a media report that U.S. President Barack Obama was close to naming former Treasury Secretary Lawrence Summers as the next Federal Reserve chief.
Japan's Nikkei newspaper, quoting unnamed sources, said Obama "is set to" name his ex-economic adviser Summers as early as next week.
Some investors see a potential Summers-led Fed adopting a more hawkish monetary policy stance than under current incumbent Ben Bernanke. That is adding to market nervousness about a change of tack at the Fed ahead next week's meeting at which it is expected to start trimming its stimulus measures.
Debate in Washington has focused on whether Obama will pick Summers or Fed Vice Chair Janet Yellen to succeed Bernanke, whose term expires in January. The appointment must be approved by the Senate.
Benchmark U.S. yields were up 4 basis points on the day at 2.94 percent, within sight of a 25-month high of just above 3 percent, hit last week as expectations firmed that the Fed will begin to cut back its massive monetary stimulus.
German Bund futures were last down 42 ticks at 137.36 with cash 10-year yields up 5 basis points at 1.99 percent, edging closer to the 2 percent mark they breached for the first time last week.
"There's talk that now it's almost a done deal that Obama will name Summers as the next Fed chief and this is seen as a hawkish bias for the Fed. We saw Treasuries selling off overnight (and) that's why today there's some adjustment in the Bund," said Patrick Jacq, a strategist at BNP Paribas.
Bunds and other top-rated euro zone bonds reversed some of the previous day's gains, notched as investors used the completion of a raft of debt sales this week to buy back into a cheapened market.
Comments by European Central Bank President Mario Draghi reiterating that the economic recovery in the euro zone was still "very, very green" and that short-term money market rates were unwarranted also helped the rebound in Bunds on Thursday.
Against that backdrop, some traders expected the fall in Bund prices to be limited, particularly as caution creeps in before the Fed meeting next week.
"This seems to be an overreaction (to the Summers report). The rally in Bunds was completely justified after Draghi's dovish comments," one trader said.
Investors are now focused on how much, not whether, the U.S. central bank will cut its monthly asset buying with new money at its September 17-18 meeting. Recent below-forecast data, including jobs growth in August and consumer spending and durable goods orders in July, has deepened uncertainty about the likely extent of the reduction.
A Reuters poll of economists on Monday found most now see the Fed trimming its $85 billion monthly bond purchases by about $10 billion, less than previous estimates of about $15 billion.
"The risk is they may do $10 billion and tweak forward guidance and we have a bit of a recovery afterwards," the trader said.
Italian bonds continued to lag Spanish ones, weighed down by uncertainty over the survival of Rome's government. Italian 10-year yields edged up 2 basis points to 4.54 percent, nudging further above Spanish equivalents, which were 1 basis point lower at 4.46 percent.
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