* Bunds hold near highs on wider Cyprus bailout implications
* Spain, Italy steady but seen in investor firing line
* Technical charts signal fresh rise for Bund futures
By William James
LONDON, March 26 German Bund futures held steady
on Tuesday, staying near highs hit the previous day as markets
worried that Cyprus's bailout could be a template applicable to
larger states that might get into difficulty.
The head of the Eurogroup of finance ministers, Jeroen
Dijsselbloem, said on Monday that a Cypriot bailout, which wiped
out some senior bank bondholders and will impose big losses on
large depositors, was a new template for resolving euro zone
He later appeared to backtrack, saying Cyprus was a specific
case with exceptional challenges but analysts
said the market was adjusting to the idea that investors and
savers will be forced to contribute to future bank bailouts.
"He may have tried to tone down his comments but the impact
has been pretty clear: risk markets have lost ground, the euro
has lost ground and peripheral bonds have come under pressure,"
said Nick Stamenkovic, strategist at RIA Capital Markets.
"Hence, investors continue to demand core government bonds
and Bunds look pretty well underpinned at the moment."
The tension supported demand for low-risk Bund futures
, which were last 15 ticks lower on the day at 144.57,
close to Monday's near three-week high.
LONG BANK HOLIDAY
Banks in Cyprus will stay shut until Thursday in a bid to
stop savers emptying their accounts while the state works on a
complex restructuring needed to secure 10 billion euros of
bailout cash from international lenders.
The euro and bank shares and bonds took the brunt of
the impact of Dijsselbloem's comments, but tight links between
sovereigns and the financial sector, which buys a large portion
of government bonds, meant there was some spillover to the euro
zone's weaker states.
Spain, whose weak banking sector made it a particular
concern, saw 10-year government bond yields rise
steeply on Monday although early trades on Tuesday showed yields
steady at 4.95 percent.
"To some extent it was an over-reaction yesterday afternoon,
but clearly the market remains nervous in the near term," said
BNP Paribas strategist Patrick Jacq. "I think that in coming
days risk assessments will improve, and peripheral spreads will
Analysts said the impact on peripheral debt was limited by
the market's faith that the European Central Bank will buy the
government bonds of states that need help and agree to certain
The promise to do so, made last July when tensions in the
currency bloc were at their height, has helped lower Spanish and
Italian borrowing costs and prevented subsequent shocks from
causing investor panic.