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EURO GOVT-Bunds rise as markets position for weaker payrolls
June 7, 2013 / 8:26 AM / 4 years ago

EURO GOVT-Bunds rise as markets position for weaker payrolls

* Bunds rise as investors brace for weaker U.S. jobs data

* Euro zone bonds rebound after ECB-led sell-off

By Ana Nicolaci da Costa

LONDON, June 7 (Reuters) - German Bund futures rose on Friday as investors looking for insight into the Federal Reserve’s policy outlook positioned for a weaker-than-forecast U.S. jobs data.

Euro zone bonds recovered from sharp losses made on Thursday after comments by European Central Bank President Mario Draghi fuelled concerns over the future of global monetary stimulus.

Market participants said the major risk was that the non-farm payrolls data undershoots expectations, in a Reuters survey, that 170,000 jobs were added last month. A private sector employment report this week came in below forecast.

German Bund futures rose 43 ticks to 143.88. The June contract expired on Thursday and has rolled over into the September one.

Markets have become particularly sensitive to U.S. data in recent weeks on concerns the Fed may soon begin scaling back its bond purchases. The central bank has said it would need to see a significant improvement in the labour market before “tapering” its stimulus measures.

“I think we have got to see (payrolls) numbers above 200,000 on a consistent basis to start really unnerving markets” regarding the possibility of Fed tapering, one trader said. “A weak payrolls, I think, is a risk.”

Euro zone bonds broadly recovered after falling in the previous session when ECB’s Draghi gave no hints that further monetary easing was imminent.

“The market probably over-reacted yesterday because the market interpreted Draghi’s comments as less dovish than expected but, in the end, they still left open the possibility to act further if the data worsens,” Alessandro Giansanti, senior rates strategist at ING in Amsterdam, said.

After keeping its main interest rate at a record low of 0.5 percent, the ECB said it discussed the possibility of cutting the rate at which banks deposit money with the central bank to below zero but would keep this and other unconventional options “on the shelf” for now.

Ten-year Spanish government bond yields fell 3 basis points to 4.63 percent after seeing their biggest daily gain since February on Thursday.

Equivalent Italian yields eased 4.5 bps to 4.29, having posted its biggest daily rise since March on Thursday.

Yields on higher rated French, Dutch and Austrian debt also fell around 3 basis points.

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