* ECB policymakers say ECB could ease policy further
* World powers reach deal with Iran to curb nuclear activity
* Iran deal sends oil prices lower, fuels disinflation talk
By Marius Zaharia and Ana Nicolaci da Costa
LONDON, Nov 25 German Bunds rose on Monday after
ECB policymakers said there was room for more rate cuts as the
prospect of lower oil prices following a deal to curb Iran's
nuclear activity reinforced a low inflation outlook.
European Central Bank Governing Council member Ardo Hansson
was quoted as saying the options on rate cuts were "still not
fully exhausted" and the bank could move by less than the usual
25 basis points.
His French colleague, Christian Noyer, said interest rates
had to stay low for an extended period and might go even lower
if needed as officials try to ensure the euro zone does not fall
German Bund futures settled 37 ticks higher on the
day at 141.32, pushing 10-year yields 2.8 basis
points lower to 1.73 percent.
"The market is moving on any comment (from the ECB). The
interpretation is that it's clear that there is a strong faction
within the ECB that is open to a deposit rate cut," said Daniel
Lenz, lead market strategist for the euro zone at DZ Bank.
"The outlook for stable oil prices ... is another argument
for the ECB to continue its current stance."
Brent crude fell by as much as $3 a barrel on Monday, before
paring losses, as a breakthrough nuclear deal between world
powers and Iran over the weekend raised expectations of an
increase in supply.
The prospect of lower oil prices and, by extension, tamer
inflation reinforced the case for more ECB action at a time when
there are worries in the market about deflation.
A surprise fall in annual inflation for October to 0.7
percent, well below its target of just under 2 percent, prompted
the ECB to cut rates this month. Inflation data for November is
due on Friday and is forecast at 0.8 percent, according to a
"Bunds are up on oil prices being deflationary, Hansson
saying there is room to cut again," one trader said.
Ten-year French government bond yields fell
2.1 basis points to 2.19 percent, while the Austrian equivalent
eased 2 bps to 2.08 percent.
"Having lower oil prices should be a boost for growth," ING
rate strategist Alessandro Giansanti said. "But on Bunds the
impact should be very limited as they are very sensitive to
action from central banks."
Uncertainty about the ECB outlook and about the timing of
any reduction in the Federal Reserve's bond-buying stimulus was
likely to keep Bunds in tight ranges in coming days, he said.