* Positioning light heading into U.S. payrolls data
* Bunds lower, but still bound by recent range
* Impatience over Spain bailout delay to grow
By William James
LONDON, Oct 5 German Bunds fell, but remained
locked in a tight range on Friday, bogged down by uncertainty
over Spain's readiness to seek a bailout and awaiting key U.S.
jobs data later in the session.
As markets continued to wait for fresh signals from Spain,
the day's focus fell on U.S. labour market data, a key influence
on Federal Reserve policy, with the non-farm payrolls report
expected to show 113,000 jobs were added in September.
"It's obviously all about payrolls today but it's going to
have to be substantially away from consensus to get us excited
-- it's been an exceptionally quiet week," a trader said.
German Bund futures fell 23 ticks versus Thursday's
settlement but prices were largely unchanged from levels seen in
The December futures contract has been contained by the
Sept. 28 high of 141.95 and Oct. 2 low of 141.10 in recent
sessions, with many investors unwilling to take new positions
until Spain clarifies when and if it intends to seek a bailout.
Next week's meeting of euro zone finance ministers had
previously been flagged as an opportunity for Spain to make an
aid request, but expectations have been pared back and the event
may result in further pressure on Spanish debt.
"For sure everyone will keep an eye on the meeting but I
don't think there's expectations of a firm decision. It could
even expose more the differences in opinion," said Elwin de
Groot, senior market economist at Rabobank.
"Very short-term this could inject even more uncertainty and
therefore a more negative sentiment in the market."
An external aid programme is politically unpalatable for
Madrid, but would activate the European Central Bank's bond
buying plan -- seen by markets as a powerful tool to lower
borrowing costs and bring the bloc's debt crisis under control.
Spanish bond yields were barely changed on the day, down 3
basis points at 5.89 percent on 10-year debt, and
1.6 bps higher at 3.39 percent on two-year bonds.
The prospect of ECB action prompted short term bonds, where
the buying would be focused, to rally sharply during August but
perceived delaying by Spain on a bailout request has pushed
yields slowly away from their lowest levels.
For German debt, the medium term weakness in almost all euro
zone economies suggested a major selloff was unlikely even if
Spain did activate the ECB bond buying and push some investors
to pare back their safe-haven bond holdings.
"We see that core markets are struggling to rally from
current levels, but from a pure fundamental economic background
it makes sense to see yields dragging down slightly," said
Patrick Jacq, strategist at BNP Paribas in Paris.
Earlier this week purchasing managers' index surveys showed
the euro zone's economic problems accelerated in September,
denting chances that the bloc would escape recession before next
(Editing by Chris Pizzey, London MPG Desk, +44 (0)207 542-4441)