* Bunds fall after Friday's U.S. consumer data
* U.S./German 10-year yield spread around 3-year highs
* Bernanke speech on Wednesday keenly awaited
By Marius Zaharia
LONDON, May 20 German Bunds fell on Monday after
forecast-beating U.S. consumer sentiment data last week dented
appetite for low-risk assets.
Friday's data eased worries that the U.S. economy could slow
down markedly due to government spending cuts and prompted
investors to speculate the Federal Reserve may scale back its
bond buying programme later this year.
Fed Chairman Ben Bernanke's testimony before the
congressional Joint Economic Committee on Wednesday will be
closely scrutinised for any hints on future monetary policy
"We have ongoing buoyancy in stocks ... on the back of
unexpectedly firm consumer sentiment survey on Friday," said
Richard McGuire, senior rate strategist at Rabobank.
"Bernanke's speech will be the key determinant on whether
the recent leg of the 'risk on' rally retains momentum."
Bund futures were 40 ticks lower on the day at
145.05. Friday's low of 145.13 was the first resistance for
Bunds, while support was at last week's low of 144.22,
Futurestechs analyst Clive Lambert said.
Lloyds strategists said in a note talk of the Fed tapering
off bond purchases could fade soon as the central bank was
"dominated" by dovish policymakers who would only change their
stance if there was evidence of sustainable U.S. growth.
Lloyds therefore recommended buying U.S. Treasuries over
Bunds and betting on a narrowing of the 10-year yield spread
between them from the three-year high of
64 basis points hit on Friday.
Other analysts see the spread widening further.
"The U.S. economy is outgrowing the euro zone and on the
back of this you have different prospects for central bank
policies and that's widening the spread," Commerzbank rate
strategist Michael Leister said.
"Our house view is that we expect another rate cut from the
ECB (European Central Bank) and also a deposit rate cut into
negative territory ... Another 15 basis points of widening in
the next couple of weeks is feasible."
Other euro zone bonds were relatively stable, with volumes
expected to be thin due to a holiday in parts of Europe.