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EURO GOVT-Bunds rise on equity sell-off, U.S. data eyed
June 13, 2013 / 12:20 PM / in 4 years

EURO GOVT-Bunds rise on equity sell-off, U.S. data eyed

* Investors find refuge in Bunds amid equity sell-off

* Investors eye U.S. data as they try to gauge Fed outlook

* Auction lifts ten-year Italian bonds

By Ana Nicolaci da Costa

LONDON, June 13 (Reuters) - German bonds rose on Thursday on global equity weakness, while ten-year Italian government bonds turned higher after an auction attracted relatively good demand.

Ongoing concerns about the future of central bank stimulus weighed on equity markets and investors looked to U.S. retail sales and weekly jobless claims to gauge when the Federal Reserve may begin scaling back its bond purchases.

A recent pick-up in yields secured healthy appetite at an auction of 15-year Italian bonds, even though borrowing costs on the three-year paper on offer jumped to their highest level since March.

“Everything taken into account, we think it was a rather good auction.” Michael Leister, senior interest rate strategist at Commerzbank said.

Ten-year Italian bonds rebounded after the auction, while shorter maturities remained under selling pressure. Italian borrowing costs over ten years fell 3 basis points to 4.34 percent.

“It seems a bit of a classical risk-off pattern again, with equities selling off overnight, (German stocks) opening weaker and Bunds finally catching a support from that.”

Bund futures were 36 ticks higher at 143.15.

Japanese stocks fell over 6 percent as the prospect of reduced stimulus from central banks roiled markets and European shares opened lower, setting the tone for the day’s trading.

ITALY AUCTION

Demand for the three-year Italian bond came in at 1.34 times the offer, in line with a month ago, while the bid-to-cover on the longer maturity rose to 1.73 from 1.32 at the previous sale.

The treasury sold 15-year bonds at 4.67 percent, in line with the previous April sale.

“The market sold off quite heavily ahead of the auction and then there was a very strong bid, particularly for the 15-year... and that seemed to put a floor under the market,” one trader said.

Ten-year Spanish yields were down 5 basis points at 4.57 percent but two-year yields were flat, mirroring the outperformance of longer-dated paper seen in the Italian bond market.

At the opposite end of the credit spectrum, ten-year German yields fell 3 basis points to 1.52 percent.

“The 1.60-1.62 (percent) area has held up quite well as a support, we didn’t push through here, so we are seeing a natural bounce away from these levels,” Leister added. (Reporting by Ana Nicolaci da Costa; Editing by Chris Pizzey, London MPG Desk, +44 (0)207 542-4441)

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