* Weak German, French data stalls German Bund selloff
* Limited recovery hints at underlying risk-appetite
* Technical charts point to fresh losses for Bunds
By William James
LONDON, Feb 14 German bond futures rose slightly
on Thursday, recovering after a fall in the previous session as
growth data from the region's two largest economies came in
weaker than forecast.
Both German and French gross domestic product data for the
final quarter of last year came in slightly below expectations
lending support to less-risky
assets and curbing enthusiasm for higher-yielding bonds.
German Bund futures were 6 ticks higher on the day
at 142.11, with analysts targeting a further rise if remaining
data comes in weak.
"(It) requires a substantial upside surprise at today's GDP
release to induce the market to further increase its growth
projections. On balance Bunds might thus benefit if the release
falls short of consensus expectations," Commerzbank strategists
said in a note.
Italian GDP data is due at 0900 GMT followed by the figure
for the whole euro zone at 1000 GMT. The data is expected to
show the bloc contracted 0.4 percent in the last quarter of
However, the relatively small size of the Bund futures gain
caused by the French and German data indicated the market's
underlying optimistic tone, and signalled that the appetite for
more risky investments may not be exhausted just yet.
"The danger is that the market looks at the data and says
it's backward looking and that things have got better since
then. Given current sentiment they might ultimately discount a
weak number," a trader said.
Italian and Spanish bonds have performed strongly this week,
and Italy was able to complete its first sale of 30-year debt in
nearly two years on Wednesday.
This left the Bund future vulnerable to further falls, which
could be exacerbated by any breach of technical chart levels.
A close below 141.90 would probably be enough to turn
momentum indicators negative, said UBS technical analyst Richard
Adcock, triggering a fresh trade recommendation targeting a fall
to 140.20 over the next few days.