LONDON, June 25 (Reuters) - German Bund futures crept higher on Monday, after three successive week of losses, as investors braced for a European Union summit later this week that many say could be disappointing.
German Chancellor Angela Merkel agreed on Friday with leaders of France, Italy and Spain on a 130 billion euros ($156 billion) package to revive growth but resisted pressure for common euro zone bonds or a more flexible use of Europe’s rescue funds.
One trader said that did not bode well for the EU summit later in the week, which would be further complicated by the absence of Greece’s new prime minister and finance minister due to illness. Greece’s foreign minister and outgoing finance minister will attend instead.
“I suppose you could argue it’s a vague step in the right direction, but it doesn’t really address the problem. I don’t think Germany is going to cave in,” the trader said. “There is a danger of disappointment.”
The German Bund future was up 11 ticks on the day at 140.99, having fallen for three weeks in a row, partly on optimism there would be a policy response to the crisis.
Spanish government bonds rallied for a fourth consecutive day on Friday after the European Central Bank relaxed its collateral rules, and investors will keep an eye on yields to see whether the impact of ECB move was lasting.
The ECB is under increasing pressure to act to restore confidence in the struggling euro zone, be it through further monetary easing or purchases of peripheral bonds.