* 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 Safe-haven German Bunds fell on
Monday after forecast-beating U.S. consumer sentiment data last
week, but a bleak outlook for the euro zone was expected to
Friday's data eased concern the U.S. economy could slow
markedly due to government spending cuts and prompted investors
to speculate the Federal Reserve may scale back its bond buying
later this year.
However, with the euro zone still in recession and investors
expecting the European Central Bank to ease its policy further,
benchmark Bund yields remained anchored around record lows.
"I don't see Bund (yields) going much higher than this. The
situation in the euro zone will probably deteriorate further and
keep the ECB on the dovish side," said Gianluca Ziglio,
executive director of fixed income research at Sunrise Brokers.
Bund futures fell 54 ticks to 144.91. Resistance
was seen at Friday's low of 145.13, with support at last week's
low of 144.22, Futurestechs analyst Clive Lambert said.
Cash 10-year Bund yields were up 4.3 basis
points at 1.358 percent. Ziglio said they were likely to fall
towards the lower end of the 1.2-1.4 percent range seen since
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 recommended buying U.S. Treasuries over Bunds and
betting their 10-year yield spread would
narrow from the three-year high of 64 bps 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.
"Another 15 basis points of widening in the next couple of
weeks is feasible."
Fed Chairman Ben Bernanke's testimony before the
congressional Joint Economic Committee on Wednesday will be
closely watched for clues on future policy moves.
Other euro zone bonds were relatively stable, with volumes
expected to be thin due to a holiday in parts of Europe.