September 12, 2012 / 6:10 AM / 5 years ago

EURO GOVT-Bunds slip awaiting German court ruling

2 Min Read

LONDON, Sept 12 (Reuters) - German Bund futures slipped at Wednesday's open as investors awaited a crucial legal ruling on the validity of the euro zone's rescue mechanism and the launch of a new five-year bond.

Few expect Germany's top court court to rule the bailout fund unconstitutional -- an outcome that would torpedo latest attempts to fix the region's debt crisis -- but some think the judges could attach tough conditions on any future German aid.

"In these markets we might see a knee-jerk selloff after they give it the OK, but how long that lasts, I don't know. It's all about the conditionality," a trader said.

Bund futures were 22 ticks lower at 140.16 shortly after the open. Commerzbank strategists saw potential for the contract to fall 50-100 ticks if the court rules in favour of the bailout fund.

In addition to the launch of Germany's new October 2017 bond , investors will be watching Dutch elections to gauge the likelihood of the country forming a government that will remain committed to austerity targets.

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