Bunds, Italian debt rise on speculation of ECB QE

LONDON, April 7 Mon Apr 7, 2014 2:42am EDT

LONDON, April 7 (Reuters) - German and Italian bond futures rose in early trade on Monday as investors weighed up the possibility that the European Central Bank could embark on a programme of asset purchases this year to support the economy.

Bunds and the rest of the euro zone government bond market rallied sharply on Friday after a German newspaper said the ECB had modelled the effects of buying a trillion euros of assets to ward off deflation.

This followed comments by ECB President Mario Draghi that policymakers were unanimous that asset purchases, also known as quantitative easing, might be needed to tackle persistently low inflation.

"After Friday's stories on QE, that remains the main focus... At the moment periphery, especially now we have got this QE talk, is massively supported. That's the most obvious trade in town," a trader said.

Italian BTP futures were last 15 ticks up on the day at 123.06 with Bund futures 14 ticks higher at 143.54.

The market will also be watching out for a Greek debt sale which might come as soon as this week, marking the country's return to the market just two years after it defaulted.

Investors were likely to shrug off the lack of a statement from Moody's on Friday, when it was scheduled to review Greece's credit ratings to at least lift them up in line with Standard & Poor's and Fitch. (Reporting by Emelia Sithole-Matarise; Editing by Hugh Lawson)

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