EURO GOVT-Bunds creep higher, focus on Portuguese auction

LONDON, Jan 12 (BestGrowthStock) – Bund futures opened higher on
Wednesday, in line with U.S. debt, with investors focussed on a
Portuguese bond sale for signs of how capable the country is of
surviving without an international bailout.

At 0705 GMT, the Bund future (FGBLc1: ) was 9 ticks higher at
125.88, broadly in line with an after-hours rise after a
successful debt sale in the United States.

Portugal’s 1.25 billion euro sale of 2014- and 2020-dated
bonds later in the session is seen as a key test of sentiment
toward the sovereign regarded as the next weakest link in the
euro zone. Auction results are due at 1045 GMT. [ID:nL3E7CC0DI]

“We do not expect a buyers’ strike, but also do not view a
covered auction to be a game-changer for Portugal given how much
more of bonds need to be sold in the coming weeks and months,”
said Commerzbank rate strategist David Schnautz.

Secondary market yields on Portuguese debt have come under
pressure since the start of the year, although European Central
Bank buying has capped rising yields this week.

Many see debt issuance at current yield levels as
unsustainable, and the vast majority of economists believe
Portugal will become the third euro zone state in under a year
to ask for a bailout. [ID:nLDE706084]
The EU’s economic chief Olli Rehn said on Wednesday the
effective lending capacity of the euro zone’s financial rescue
fund should be reinforced and the scope of its activity widened.
The issue is set to be discussed by finance ministers on Jan.
17. [ID:nLDE70A1RM] [ID:nLDE70B007]

Germany will launch a new five-year bond with a sale of up
to 6 billion euros of 2 percent paper (DE114159=: ) and also
reopen its April-2020 inflation-linked bond (DE103052=: ).

In the cash market, the 10-year German bond yield
(DE10YT=TWEB: ) was 2.925 percent, up half a basis point, while
the two-year Schatz yield (DE2YT=TWEB: ) was up 0.5 basis points
at 0.896 percent.

(Reporting by William James; editing by Patrick Graham)