LONDON, March 28 (Reuters) - German government bonds opened lower on Monday after a state election rout for Chancellor Angela Merkel’s conservatives and pulled down by U.S. Treasuries as investors upped interest rate hike bets.
Portuguese bonds meanwhile will remain under pressure with the country in political limbo and facing snap elections which could make it difficult for Lisbon to finance itself ahead of bond redemptions in April and June [ID:nLDE72P0DF].
June Bund futures FGBLc1 were 33 ticks lower at 121.70. Two-year bond yields DE2YT=TWEB were 2.3 basis points higher at 1.752 percent, with 10-year yields DE10YT=TWEB up almost 3 basis points at 3.30 percent.
“Political instability is not good for the euro zone, and especially the dominant force in it,” said a trader.
Chancellor Angela Merkel’s conservatives lost power in a regional stronghold on Sunday. [ID:nLDE72Q0E6]
Trading remained dominated by short-term players, the trader added.
“The long-term investors are still sidelined and it’s U.S. payrolls on Friday so there’s not really any reason for anyone to get involved ahead of that.”
U.S. Treasuries were lower as traders made space for $35 billion in two-year note supply and placed bets that the Federal Reserve may raise interest rate sooner than previously thought [US/]. (Reporting by Kirsten Donovan; Editing by Toby Chopra)