January 21, 2013 / 7:21 AM / in 5 years

EURO GOVT-Bunds dip after U.S. debt limit proposal

LONDON, Jan 21 (Reuters) - German Bund futures dipped on Monday after an attempt in the United States to raise the debt ceiling enough so it could pay its bills for another three months dented appetite for safe-haven assets.

U.S. House Republican leaders said on Friday they would seek to pass a three-month extension of federal borrowing authority in coming days to buy time for the Democrat-controlled Senate to pass a plan to shrink budget deficits.

European shares were seen supported by the news, but with no clear response from the Democrats and an expected thin session ahead due to a market holiday in the United States, the impact on Bunds was seen limited.

“This is part of the political game, it remains to be seen whether the Democrats will accept it. The market ... still thinks at the end of the day we will see a solution,” KBC strategist Piet Lammens said.

“With the U.S. closed we don’t expect too much from today’s trading.”

The U.S. Treasury needs congressional authorization to raise the current $16.4 trillion limit on U.S. debt sometime between mid-February and early March. A failure to achieve that could lead to a debt default.

At 0714 GMT, Bund futures were 7 ticks lower on the day at 143.25.

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