LONDON Jan 11 German Bund futures fell at the
open on Friday, extending the previous day's losses, after the
European Central Bank sounded a cautiously optimistic note on
the euro zone economy.
Expectations of a strong Italian bond auction later in the
day, after Spain made a successful start to its 2013 fund
raising programme on Thursday, eroded demand for low-risk Bunds.
Bunds resumed last week's falls after ECB President Mario
Draghi said policymakers were unanimous in holding interest
rates steady at their meeting on Thursday, cooling expectations
of a near-term cut. He also said the economy would recover later
in 2013 and there were already some signs of stabilisation.
"Yesterday the market was pricing out any near-term rate
cuts and the periphery had a good day so it's all negative for
Bunds," a trader said.
At 0703 GMT, the Bund future was 10 ticks lower at
142.60 compared with 142.70 at Thursday's settlement.
"The Italian auction is pretty small so it will go well so
presumably Italy and the periphery will remain supported so
things might be a bit fragile for Bunds," the trader said.
Italy will sell up to 3.5 billion euros of its 2015 bond and
up to 1.5 billion euros of two five-year floating rate CCTeu
notes, with borrowing costs for the three-year paper expected to
fall below 2 percent to levels last seen in March 2010.