* Bunds rise but within recent ranges
* Credit Suisse flags Bund resistance at 141.90-95
* IMF, German divergence adds to uncertainty
By Ana Nicolaci da Costa
LONDON, Oct 12 German Bund futures tracked gains
in U.S. Treasuries on Friday, but traders expected another quiet
session with no more clarity yet on when Spain will seek a
A Spanish request for aid would likely trigger European
Central Bank bond buying, but the euro zone's fourth-largest
economy seems in no hurry to seek help. Its borrowing costs have
been broadly under control since the promise of potential
intervention was made.
The psychological impact of the ECB's pledge was made clear
this week when a downgrade to Spain's credit rating to one notch
above "junk" by Standard & Poor's had only a fleeting, limited
impact on sovereign debt markets.
"We are just in line with where Treasuries were late
yesterday," one trader said. "We are in a boring, low volume
range ... No one is actually doing anything because everybody is
waiting for news on Spain or Greece."
German Bund futures were 18 ticks higher at 141.33.
The contract has been stuck in a 140.70-141.95 range over the
last three weeks and shows no sign of breaking out for the time
being, said David Sneddon, technical analyst at Credit Suisse.
"You are pretty much as sideways as you want to get it
within the range. It only starts to get exciting above
141.90-95," he said, adding that was a big resistance level.
EURO ZONE OUTLOOK
Uncertainty over how the euro zone debt crisis will develop
from here was also underpinning demand for safe-haven bonds,
some market players said.
In a softening of earlier positions, the International
Monetary Fund has argued that forcing Greece and other
debt-burdened countries in Europe to reduce their deficits too
quickly is counter-productive because it hurts the economy.
The shift shows just how worried policymakers are about the
euro zone's growth outlook. But Germany pushed back against that
advice, saying that reversing course on promised deficit
reductions would only weaken credibility.
"This is only a confirmation that at the global level
policymakers differ on the way forward. You would expect that
after a such long period of crisis, there (would be) more
convergence in opinions," Elwin de Groot, senior market
economist at Rabobank said.
There was also a lingering question mark on when Spain would
request a bailout which would likely trigger central bank
intervention - the promise of which has provided some stability
to sovereign debt markets recently.
The prospect of a financial backstop has meant that any rise
in Spanish yields is now seen as an opportunity to buy, given
that investors are broadly reluctant to put on selling positions
on the Spanish debt market, analysts say.
Ten-year Spanish bond yields were down 3.6
basis points at 5.75 percent but were within recent ranges. De
Groot said only an event that would prompt yields to head back
towards 7 percent would be enough to push Spain to seek help.
"We have been in a Catch-22 situation," he said. "If you
start selling the paper now and suddenly within a few weeks
Spain says we are going to do it, the yields will drop back a
lot so you actually miss this opportunity."
Spain's borrowing costs over two years were
down 6.4 basis points at 3.20 percent.
Ten-year Italian yields dipped below 5
percent, and was down 3.3 bps at 4.99 percent.