* Little progress achieved on U.S. "fiscal cliff"
* Greek debt concerns linger on; safe-haven bonds rise
* German five-year debt auction seen well-bid
By Marius Zaharia
LONDON, Nov 28 German government bonds rose on
Wednesday as concerns over the lack of progress towards averting
large-scale, automatic budget tightening in the United States
next year supported assets seen as safe havens.
The Congress and the White House are yet to reach a deal on
budget measures to avoid the $600 billion "fiscal cliff", which
economists warn could send the U.S. back in recession and hit
the global economy in turn.
Senate Majority Leader Harry Reid said on Tuesday that he
was disappointed that there had been "little progress" on the
Those signals overturned the upbeat tone among stock market
investors prompted by a deal in the euro zone to release the
next aid tranche to Greece. A sale of five-year German debt -
the euro zone's safest bet in troubled times - was expected to
go well later in the day as a result.
"As long as that (the fiscal cliff) is in play we're not
going to see Bunds trade off too far ... given the growth
implications next year," one trader said.
Bund futures were 33 ticks higher at 142.56, while
10-year cash Bunds yielded 1.402 percent, 3 basis
points lower than the previous close.
German bonds weakened only slightly on Tuesday on the back
of the Greek deal as markets applauded the escape from an
imminent default but remained concerned that Athens' finances
were still not back on a sustainable path.
There was little detail about a planned debt buy-back and it
was unclear whether enough investors could be convinced to
participate to make the operation efficient in reducing Greece's
"Investors remain sceptical of the whole thing and I don't
think it answers many questions about the sustainability of debt
dynamics," said Brian Barry, fixed income analyst at Investec.
"I'm not entirely sure that ultimately the scale of
buy-backs will be sufficient to have any meaning," he said.
Greece will be a "drag on sentiment" for years to come, he
The German auction is expected to draw solid bids from
investors as they seek low-risk assets for shelter from the
Greek crisis and the U.S. fiscal risks.
Bets that the European Central Bank will keep official
interest rates low for a protracted period have also contributed
to generally strong five-year German debt auctions this year.
Five-year Bobl yields were 2.6 basis points
lower on the day at 0.424 percent.
"They're not exactly yielding a great deal but if you're
concerned over continued underperformance of risk assets over
the next year this might be the place to be," Barry said.