LONDON, March 20 Fresh uncertainty over Cyprus's
future in the euro zone kept German Bunds in demand at elevated
levels on Wednesday after the country's parliament rejected a
bailout plan that involved taxing savers.
Bund futures, used as a safe-haven in times of
market stress, were 5 ticks lower at 144.57 but held relatively
firm at the high price levels seen before a 36-0 vote by the
Cypriot parliament to reject the bailout.
"Bunds remain well underpinned, it will continue to be a
mess. The risk is that we see more serious contagion... we're
sticking to our long Bunds, short periphery positions," a trader
The chaos in Cyprus has already caused investors to back
away from bonds issued by the region's other struggling
peripheral countries, and upward pressure on Spanish and Italian
bond yields was expected to continue throughout the session.
Cypriot banks remain shut on Wednesday and party leaders
were due to start a meeting at 0700 GMT to explore a way
forward. The precarious position of the country's banks, which
are heavily dependent on European Central Bank support, has led
policymakers to urge rapid progress on a new solution.