* Bunds stable before ECB meeting, Spanish yields rise
* Spanish sell debt comfortably at lower yields
* Bailout uncertainty dominates markets
By Marius Zaharia
LONDON, Oct 4 Spanish bond yields rose on
Thursday with investors still nagged by uncertainty over when
Spain will seek a bailout, even though the country was
successful in finding buyers for its debt at an auction.
Spain sold just shy of 4 billion euros of three bonds on
Thursday, with higher demand than at previous auctions and
yields falling on two of them.
German Bunds were little changed as the European Central
Bank was seen keeping policy steady at a rate-setting meeting
The auction in Spain signalled that investors are confident
that Madrid will request a bailout at some point, paving the way
for the ECB to buy its bonds and lower its borrowing costs.
But while demand at auctions -- generally dominated by
domestic investors -- remains strong, traders said activity in
secondary markets was subdued, with most foreign investors
staying on the sidelines.
Analysts warn that markets may soon lose their patience.
"Markets are going to continue to oscillate around news and
rumours of a Spanish bailout," RIA Capital Markets bond
strategist Nick Stamenkovic said. "Certainly after regional
elections (in late October) markets will start testing the
resolve of the Spanish government."
Spanish 10-year bond yields were last 8 basis
points higher on the day at 5.90 percent, a high level that
indicates market discomfort with the perceived lack of urgency
in addressing the country's debt pains.
On Tuesday, Prime Minister Mariano Rajoy said a European
bailout package was not imminent.
The uncertainty about the timing of a bailout request has
kept bond markets in a tight range in recent days. No strong
impulse is expected from the ECB meeting either, with the bank
expected to hold its main reference rate at a record low 0.75
Some economists expect the ECB to cut rates further by the
end of the year and may look for signals on future policy moves
from President Mario Draghi in his news conference at 1230 GMT.
The impact of that would be limited, however, as investors
would be reluctant to bet on any firm gains in German Bunds
given the possibility of Spain asking for aid at any point - a
move which could dampen appetite for safe-haven assets.
"It doesn't seem like there is a lot of conviction on what
the next trade is out there and positioning is pretty square,"
one trader said.
He said the focus of Draghi's news conference would be
Spain, but analysts said he is unlikely to say anything other
than that he is waiting for struggling euro zone members to make
a request for aid before the ECB will consider any intervention.
"They showed their cards the last time," said Brian Barry,
fixed income analyst at Investec.
Bund futures were 1 tick higher on the day at
141.60. Investors will also focus on jobless claims data due out
of the United States on Thursday and the U.S. non-farm payrolls
report on Friday.