* German September consumer confidence slips
* Italy must revise down GDP forecast - Finance Minister
* Bund future nears contract high, cash yields fall
* Germany's Schaeuble says Draghi comments
* Austria's OVP party appoints new leader after resignation
By John Geddie
LONDON, Aug 27 German Bund yields fell back
towards record lows on Wednesday, as further evidence of the
bloc's faltering economy fed market expectations for more
European Central Bank stimulus.
Weaker-than-expected consumer confidence in Germany drove
the market, together with reported comments from Italy's economy
minister that Rome must revise down its economic output growth
Eager to tackle the euro zone's economic malaise, ECB
President Mario Draghi on Friday appeared to shift the bank's
policy response away from austerity towards growth. Crucially
for investors, he left the door open to a broad-based programme
of asset purchases known as quantitative easing (QE).
"When the EMU's largest economy is falling behind, this is
very much increasing the chances of the ECB heading for further
monetary measures, above all QE," said DZ Bank strategist Daniel
German Bund futures came within a tick of the all-time
contract high of 151.10 early on Wednesday, while 10-year bond
yields opened 2 basis points lower at 0.928, a shade above the
record low of 0.926 percent hit on Monday.
Spanish and Italian bond yields both hit new record lows for
the third consecutive day, down 7 bps and 5 bps respectively at
2.12 and 2.38 percent, respectively.
With Draghi particularly concerned about the decline in
market expectations of inflation, the latest consumer price
growth in Germany due on Thursday and then the euro wide data on
Friday will be closely watched.
While few expect the ECB to take announce further policy
action at its meeting next week, one trader said investors will
be "hoping for all the right noises".
But there is certainly room for disappointment as well.
Germany's Finance Minister Wolfgang Schaeuble told a
newspaper on Wednesday that Draghi's comments at Jackson Hole
had been "over-interpreted", particularly in reference to fiscal
policy playing a greater role in promoting growth.
Elsewhere, Austrian bond yields dipped 2 bps to 1.67 percent
after news late on Tuesday that Austria's conservative People's
Party has picked Economy Minister Reinhold Mitterlehner to
replace Michael Spindelegger as party leader, who resigned
unexpectedly in a row over tax reform.
Spindelegger's departure comes amid a political battle in
Europe over whether belt-tightening has gone too far at the
expense of economic growth, a clash that has also forced a
government reshuffle in France this week.
(Editing by Hugh Lawson)