LONDON Feb 6 Bund futures edged up on Wednesday
before a sale of five-year German debt that is expected to find
strong demand due to a recent rise in yields and political
uncertainty in Spain and Italy.
Italian and Spanish bonds reversed on Tuesday some of the
losses made at the start of the week on the back of corruption
allegations in Spain that put Prime Minister Mariano Rajoy under
pressure and an increasingly uncertain outcome in Italian
elections later in February.
Better-than-expected data brought back some optimism about
the euro zone, but lower-rated debt and safe-haven Bunds are
bracing for a volatile period ahead, traders said.
"There are fairly ominous signs (in the periphery). I know
they (Italian and Spanish bonds) had a good day yesterday, but
there's Spanish supply coming up," one trader said.
At 0703 GMT, Bund futures were 7 ticks higher at
Germany plans to sell up to 4 billion euros of debt later in
Five-year yields have more than doubled to
about 0.7 percent in 2013 on bets that the excess liquidity in
the banking system may shrink faster than initially thought as
banks repay vast amounts of long-term emergency loans to the
European Central Bank, which meets on Thursday.