| LONDON, Sept 25
LONDON, Sept 25 German government bonds inched
higher on Wednesday, adding to recent gains on the back of
reassurances from central banks that policy will remain
A below-forecast Ifo business sentiment survey on Tuesday
raised the risk that markets may have priced in a faster
economic recovery than they should have - a positive for prices
of top-rated bonds.
Data on Wednesday showed German consumer sentiment hit six
year highs, in line with expectations, but French industry
morale fell and undershot forecasts.
European Central Bank policymakers including President Mario
Draghi said earlier this week it was too early to end crisis
measures and unconventional tools such as new long-term loans to
banks remained a possibility going forward.
"The central banks are guiding us through," one trader said.
Bund futures were 13 ticks up on the day at 139.67,
about two-and-a-half points higher than the lows hit before the
U.S. Federal Reserve surprised markets by not trimming asset
purchases last week.
Ten-year cash German yields fell 1 basis point
to 1.79 percent.
Traders said concerns about a possible U.S. government
shutdown limited room for any fall in Bunds, still a safe-haven
for investors in times of political and fiscal nerves.
Congressional authorisation for the government to spend
money runs out on Sept. 30. U.S. politicians are engaged in
serious discussions to pass a resolution to keep the government
running, but have not yet found common ground.
"So far there is little evidence of stress ... (but) it can
be a key market driver at some point," BNP Paribas rate
strategist Patrick Jacq said.
"We've already had this sort of problems several times in
the past. The market is used to that, but probably it's a
mistake because at some point we might have a government
He expected Bunds to remain data-dependent in the near-term.
Other euro zone bonds were broadly steady.
Italy will offer up to 3.25 billion euros of bonds linked to
euro zone inflation and zero-coupon paper on Wednesday, before
selling up to 6 billion euros of conventional bonds on Friday.