* EU finance ministers unlikely to OK Greek aid release
* Euro zone GDP growth data to confirm slowdown
* Bunds seen keeping close to two-month highs
By Emelia Sithole-Matarise and Marius Zaharia
LONDON, Nov 12 German bonds were steady near
two-month highs on Monday as uncertainty over the outcome of
talks on financial aid for Greece and a potential U.S. fiscal
crisis kept markets nervous.
Euro zone finance ministers were in a meeting to discuss
Greek progress on controlling its debts but they were not
expected to release a new tranche of funding despite Athens
approving a tough 2013 budget on Sunday.
Greece's lenders were expected to give the country two more
years to reach its goals. The sticking point was how to make its
German Bunds were seen remaining near current levels for as
long as the situation remained unresolved.
On Monday, 10-year yields were flat at 1.34
percent, while Bund futures were 5 ticks higher on the
day at 143.19, having risen as high as 143.47 on Friday, their
highest since early September.
"The market is waiting to see when or whether Greece is
going to get some more money," said Niels From, chief analyst at
Nordea in Copenhagen.
From said the signals coming from euro zone leaders were
"pretty constructive", so Bunds may look "pricey" at current
levels and more bad news was needed to push Bund yields below
last week's lows around 1.30 percent.
He added, though, that room in the opposite direction was
also limited. Risks were not only related to Greece, but also to
the automatic spending cuts and tax rises that might kick in in
the U.S. next year.
Athens has to redeem 5 billion euros worth of treasury bills
on Nov. 16 and had been counting on cash from the next aid
tranche to help cover that. That has left it with not much
choice but to roll over the bills.
A senior debt agency official said Tuesday's one- and
three-month bills issuance should be fully-funded
, but markets took little comfort from those
"Greece has said they'll get enough money to cover the 5
billion maturing bills this week but there's still an unknown
hanging over the market on when the Eurogroup is going to
approve the aid," a trader said.
U.S. BUDGET BATTLE
Investors are closely monitoring talks between President
Barack Obama and the Congress on a fiscal deal to avert a $600
billion package of automatic tax hikes and spending cuts next
year that could send the U.S. economy back into recession.
That possibility and the ripple effects it could have on the
already-battered euro zone are likely to keep U.S., German and
other top-rated government debt supported.
"Whilst there's uncertainty remaining on Greece and the
United States, core government bonds will remain underpinned but
I think 10-year Bunds at these levels look pretty rich," Nick
Stamenkovic, strategist at RIA Capital Markets, said.
"Near term we could see Bund yields test the 1.30 level but
at those sort of levels investors will be reluctant to push the
yield significantly lower unless we see signs of significant
disagreement in the U.S. and/or problems with financing in
Greece," Stamenkovic said.
Gross domestic product data from Germany, France and Italy
this week is widely expected to confirm a slowdown in the euro
zone's leading economies and may also support safe-haven assets.