* German bonds stabilise as heavy selling pressure eases
* Doubt over U.S fiscal problems injects note of caution
* Busy supply schedule sees Netherlands, Austria tap market
By William James
LONDON, Jan 8 German government bond prices
stood unchanged on Tuesday as investors sought to draw a line
under last week's steep selloff though technical charts
signalled the fall may not be finished yet.
Benchmark German Bund futures dropped by three points last
week after a late deal by U.S. policymakers to avert a damaging
fiscal contraction pushed investors to buy riskier assets.
"We're seeing a bit of stability returning to the Bund
market at the moment," said Nick Stamenkovic, strategist at RIA
Capital Markets in Edinburgh.
"Investors are a bit nervous ahead of the upcoming U.S.
earning season and we've still got the debt limit discussions to
come in the U.S. as well as Italian elections next month."
The U.S. budget deal struck last week was seen as only the
first step to resolving the political deadlock over fiscal
policy, with some in the market preparing for a protracted
debate on raising the country's borrowing ceiling.
After initially opening higher, Bund future prices
were last unchanged at 143.06, with some traders betting that a
small rebound seen on Monday had further to run.
"Last week's selloff looks a bit overdone and we're starting
to retrace that now. For choice I'd look to play this market
from the long side," a trader said, referring to bets that Bunds
Despite the stabilisation in prices, technical charts still
showed Bunds were vulnerable to further selloffs.
"The risk of renewed declines is not over yet and therefore
potential for another rise in yields prevails," said analysts at
Helaba Landesbank Hessen-Thueringen, citing a breach of the 100-
and 200-day moving averages as well as a push through long-term
The session features a busy supply schedule with top-rated
sovereigns Austria the Netherlands issuing bonds while
bailed-out Ireland plans a further step in its return to debt
issuance with a five-year bond syndication.
Irish five-year yields rose 6 basis points on
the day to 3.41 percent. A market source told IFR, a Thomson
Reuters service, Dublin was taking indications of interest in
the bond in the mid-swaps plus 260 basis points area.
Spain, at the frontline of the debt crisis and expected by
many to turn to official lenders for a bailout in 2013, will
detail how much money it needs to raise this year at around 1000
"One of the key issues going forward is whether the amount
of supply that Spain faces this year will eventually force them
into the hands of the ECB. I think it probably will but it
doesn't look as though there's any rush," Stamenkovic said.
The Netherlands began its 2013 fundraising by selling 3.2
billion euros of three-year bonds at an average yield of 0.318
It was the first euro zone bond issued with a collective
action clause -- a measure designed to make debt restructurings
easier to manage. Since the beginning of this year, all new
sovereign bond issues from the region must contain CACs.
Barclays Capital analysts said the inclusion of the clause
was not expected to make a difference at Tuesday's auction,
highlighting pre-issue prices that showed the bond traded only
slightly cheaper compared to other surrounding issues.