LONDON, March 15 Bunds were steady on Friday in a cautious market as Italy's parliament convenes for the first time since last month's inconclusive election, with parties still deadlocked over how to form a government.
The Feb. 24-25 vote produced a hung parliament, with the centre-left winning control over the lower house but not of the Senate. Analysts say the leadership vacuum could derail Italy's efforts to return to growth and keep its 2 trillion euro debt pile under control.
Italian bonds have so far been largely able to weather the heightened uncertainty as investors, encouraged by the perceived safety net offered by the European Central Bank's untested bond-buying programme, have continued to chase the relatively high yields on offer.
But the political wrangling expected in coming days could unsettle some of those investors and Italian bonds could face increased volatility in the near term. Safe-haven German Bunds may then get a boost.
"We're waiting for the first concrete news out of Italy ... we're a long way off any form of stability there," one trader said.
At 0702 GMT, Bund futures were 1 tick lower at 143.13.