LONDON Feb 22 German Bund futures hovered
around four-week highs on Friday, with worries about the euro
zone's economic outlook and the Italian elections expected to
keep safe-haven debt well bid.
Key for the region's benchmark bonds will be the amount of
three-year crisis loans that banks will pay back to the European
Central Bank. Banks are expected to pay back 130 billion euros
of the 530 billion euros they took a year ago, when the ECB
flooded the banking sector with cash to prevent a credit crunch.
That amount is slightly less than the 137 billion euros
which was repaid in January when the first of the two three-year
lending operations became eligible for early repayment. At that
time, German debt yields briefly rose in line with money market
rates on expectations that the excess liquidity in the system
would evaporate at a faster pace than initially thought.
Bund futures were last 2 ticks higher at 143.40,
having hit a four-week high of 143.60 on Thursday.
Italian elections run the risk of producing a fragmented
parliament which could hamper the future government's reform
efforts and Bunds are seen holding firm at least until the
results come out.
"(The) extension of (the) risk averse environment depends on
key event risk, particularly (this) weekend's Italian
elections," Credit Agricole said in a note.
The Ifo German business sentiment survey will be watched for
further clues on the euro zone outlook after business activity
data on Thursday showed the economic downturn in the region
unexpectedly worsened in February.