* Italian, Spanish bonds weaken before auction
* Investors reluctant to place big bets before key events
* Bunds seen in 142-143 range before c.bank meetings
By Marius Zaharia and Ana Nicolaci da Costa
LONDON, July 29 Italian and Spanish government
bond yields rose on Monday as investors made room in their books
for new paper to be auctioned later in the week.
The Italian Treasury will offer up to 6.75 billion euro ($9
billion) of bonds maturing in 2018 and 2024 on Tuesday, while
Madrid will sell 2-3 billion euros of 2016 and 2018 bonds on
Italian 10-year bond yields rose 6 basis
points on the day to 4.46 percent, while equivalent Spanish
yields were up by a similar amount at 4.65
"This is a concession the market is building ahead of the
auctions," one trader said.
The amount of debt on sale in each of the two countries is
1-2 billion euros below this year's average, so the pre-auction
selling pressure was smaller as well. However, thin trading
volumes exacerbated the rise in yields, traders said.
The auctions are expected to go smoothly thanks to large
debt redemptions this week, while Italian and Spanish bonds have
also continued to benefit from domestic investor support and
from the European Central Bank's bond-buying promise.
Some 10 billion euros of Italian bills are due to be repaid
on Wednesday, while 25 billion euros of bonds mature on
Thursday. Italy and Spain pay a combined 16.6 billion euros
worth of coupons this week, according to Reuters data.
"Cash-flows back to investors should support both the
Italian and Spanish auctions," Commerzbank rate strategist
Michael Leister said.
Against that backdrop, Italy's short-term borrowing costs
fell to their lowest since May at an auction on Monday.
German Bund futures were 1 tick lower on the day at
142.47, with investors reluctant to place big bets before a
series of monetary policy decisions and key data such as U.S.
non-farm payrolls this week.
The European Central Bank, the Bank of England and the
Federal Reserve are expected to offer reassurances that their
monetary policies will remain loose.
Commerzbank's Leister said the market was "fairly neutral"
going into the central bank meetings and that Bund futures would
probably trade in a 142-143 range until then.
"At least for the ECB, there is not too much expectation,
but they showed us last time around that they are good for a
surprise," he said. "For the Fed, (it is) really difficult to
say, there seems to be the consensus that they will start
tapering in September which we think might be a bit too early."