January 18, 2013 / 7:59 AM / 5 years ago

EURO GOVT-German 2-yr yields up on ECB loan repayment jitters

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LONDON, Jan 18 (Reuters) - German two-year government bond yields rose near their highest in nearly 10 months on Friday with traders citing growing jitters in money markets over early bank repayments of three-year European Central Bank loans.

Two-year yields extended Thursday's climb when short-term money market rates rose to their highest level since July, as anticipation built ahead of the repayments of loans from the ECB's long term refinancing operation (LTRO).

Banks can start making them at the end of January.

Suggestions that banks may also have to provide more detail on the collateral they exchange for cash at the ECB, something which could ultimately restrict banks' usage of the cheap loans, added to the jitters.

"The (German) front end is being hit by the LTRO story. My view is it's oversold at the front end but there's something else at play there so it's very difficult to trade against it," a trader said.

German two-year yields rose to 0.25 percent, near peaks hit in late March 2012.

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