LONDON Oct 25 Bund futures held near two-month
highs on Friday before the release of a German business
sentiment survey that will give more clues to the strength of
the euro zone economic recovery.
The Ifo survey is expected to edge up to 108.0 in October
from 107.7 a month before, but traders said some investors are
positioning for a smaller number after weaker data this week.
A run of improving economic data has weighed on Bunds and
supported lower-rated debt in the past few months.
The euro trading around two-year highs versus the dollar
is an additional worry for the currency bloc, where
stronger exports are needed to foster the type of growth that
could bring debt levels down to more sustainable levels.
Bund futures were 3 ticks higher at 140.90, with
Thursday's two-month high of 141.22 still in sight. Cash 10-year
German yields were flat at 1.77 percent.
"We are getting concerned about the (euro zone) recovery and
I don't think the strong euro will help (curb) that sentiment in
any way," one trader said.
Thursday's below-forecast manufacturing and services surveys
have also pushed up Spanish and Italian yields from five-month
lows, although expectations central banks will maintain
ultra-easy policy are likely to support both top and lower-rated
Spanish 10-year yields were 3 basis points
higher at 4.17 percent, while equivalent Italian yields
were 4 bps up at 4.18 percent.
"Similar to equity markets, what we have is different types
of assets driven by liquidity," said Bayerische Landesbank chief
strategist Marius Daheim.
He does not expect the European Central Bank to inject more
liquidity into the market to curb the strong euro, as some have
bet, but he has pushed back his forecast on when the Federal
Reserve will start trimming its stimulus to March from December.