* Bund futures rise half a point as GDP data falls short
* Peripheral resilience hints at underlying risk-appetite
* Bunds hover around key technical resistance
By Ana Nicolaci da Costa and William James
LONDON, Feb 14 German Bund futures rose on
Thursday as economic growth data for the euro zone fell short of
expectations and pushed some investors towards the safety of
The euro zone economy slipped deeper into recession than
expected in the last quarter of 2012, contracting 0.6 percent
compared to a forecast of 0.4 percent. Germany, France and Italy
- the region's three largest economies - all performed worse
"This is not good news. It shows a need for fairly relaxed
monetary policy for some time to come and it increases the risk
on the peripherals," said Elisabeth Afseth, analyst at Investec
That propelled German bonds - which are seen as a safe but
low-yielding place to park cash during times of stress - higher
on the day. Bund futures rose 54 ticks to a settlement
close of 142.59.
Weak growth has the double-pronged effect of hampering the
economies on the euro zone's fringes as they struggle to escape
their large debt burdens, while keeping 'core' German yields low
in anticipation of lower European Central Bank interest rates.
Traders also pointed to comments from European Central Bank
vice-president Vitor Constancio, who said a negative deposit
rate at the central bank remained possible, as supporting Bunds.
"We had weak GDP and then Constancio on negative rates.
We've probably over-reacted but that's pushed Bunds up through
resistances at 142.15, and now were hovering around another one
at 142.55," a trader said.
A decisive break above 142.55, the closing level from Feb.
12, could give scope for a rise to 143, but that marked the top
of the recent range and was likely to contain any rallies, the
The peripheral market's relatively muted reaction to the GDP
data underscores investors' ongoing appetite for risk, made
possible by the ECB's pledge that it will intervene should
struggling euro zone countries ask for help.
That promise has made investors reluctant to sell Italian
and Spanish debt, spurring them instead to return to those
markets to earn a profit.
Italian and Spanish bonds erased
early losses, with 10-year yields ending the day flat at 4.40
percent and 5.21 percent respectively.
"The resilience of the peripheral debt is quite surprising,"
said Cyril Regnat, fixed income strategist at Natixis,
highlighting the growth data and upcoming Italian elections.
Corruption allegations against Spanish Prime Minister
Mariano Rajoy's party and political uncertainty in Italy ahead
of this month's election has recently caused a six-month-long
peripheral bond rally to pause.
But the correction has been limited despite the risks
associated with the Italian vote, which some analysts fear will
result in a fragmented parliament and a weak government that
will struggle to push through structural reforms.
"If we don't have any sell-off on the debt it means investor
concerns regarding these elections are not so high," Regnat
said. "For this month, this is probably the biggest risk, at
least for Italian BTPs," he added.