LONDON, Nov 29 (Reuters) - German Bund futures dipped on Thursday as global equities rose overnight, with investors looking to Italy’s last funding hurdle of 2012 to gauge whether a recent rally in higher-yielding bonds would continue.
The treasury is seeking to place up to 6 billion euros of five- and 10-year bonds at an auction that could bring Rome within reach of its 460-465 billion euros ($594-$600 billion)2012 borrowing target.
Italian bond prices did not cheapen in the run-up to the auction this week but improved sentiment towards riskier euro zone debt after a deal on the next tranche of Greek aid should provide a favorable backdrop to the sale. Italy paid less than 1 percent on Wednesday to sell six-month bills - its lowest in more than two years.
“It might be an average auction because there is a bit of a lack of concession but then I think it probably trades okay afterwards given there is no more supply,” one trader said.
German Bund futures fell 18 ticks to 142.77, taking their cue from higher equity markets buoyed by the latest rhetoric on the so-called U.S. “fiscal cliff”.
Markets have been and are expected to remain sensitive to comments by lawmakers on the progress of talks to avert $600 billion worth of automatic tax hikes and budget cuts next year until a deal is found.
“It’s the biggest single factor between now and the end of the year in terms of moving the market. Bond markets are pretty thin and (the danger is) we react to every headline/soundbite,” the trader added.