* Euro zone bonds rebound after c. bankers' dovish comments
* Bund also benefit from month-end buying
* Euro zone yields fall but tipped to stay off year's lows
By Ana Nicolaci da Costa
LONDON, June 28 German Bunds rose for a fourth
consecutive session on Friday after central bankers sought to
calm concerns about reduced monetary stimulus, but were still on
course for a second straight month of losses.
Trade continued to be driven by expectations over when the
U.S. Federal Reserve may begin curbing monetary stimulus and
against that backdrop, traders said, investors would look to
data on business activity in the U.S. Midwest for the latest
insight into the health of the world's largest economy.
Investors dumped euro zone bonds across the credit spectrum
in recent weeks on worries about future monetary support,
reinforced last week by Fed Chairman Ben Bernanke, who said he
expected a slowing in the pace of bond buying later this year.
Investors snapped some paper back up after the European
Central Bank said an exit from its exceptional monetary policy
measures remained distant and after two Federal Reserve
policymakers said markets had misinterpreted the U.S. central
Euro zone bonds are now stabilising and analysts said they
did not expect yields to fall back to this year's lows.
"You've had a pretty significant rally from the lows over
the last two three days. I think it's reasonable to assume some
sort of pause," one trader said.
"The market is going to oscillate between the fundamental
backdrop of deleveraging and the fact that the central banks are
probably not going to be as hawkish in their actions as some
people seem to have feared."
German Bunds rose 19 ticks to 141.65, also
benefiting from month-end buying, according to traders.
This pushed 10-year German yields 1.5 basis
points lower to 1.71 percent, while the borrowing costs for
Belgium and the Netherlands also fell.
Ten-year Italian government bond yields fell
4.8 bps to 4.54 percent. Spanish bonds underperformed and
10-year yields were flat at 4.76 percent, having
fallen at the open.
Analysts expected peripheral euro zone yields to have only
limited room to ease further now that the idea of tapering was
in the market and that volatility was expected to persist.
"The potential for a rally in the peripheral space is now
more limited," said Patrick Jacq, European rate strategist at
"Liquidity and credit risk assessment has changed since the
Fed spoke about tapering off... In the risk-reward environment,
it will require higher yield than in the past because volatility