EURO GOVT-Bunds lower with Treasuries, Spanish auction looms

LONDON, Dec 16 (BestGrowthStock) – German government bonds opened
lower on Thursday, pulled down by further weakness in U.S.
Treasuries, while sentiment towards the euro zone’s more
indebted issuers will be tested by Spain’s last bond auction of
the year.

Ten-year U.S. Treasury yields (US10YT=RR: ) hit fresh 7-month
highs in late trading on Wednesday and yields, despite easing
from there, were still around 7 basis points higher than at the
previous day’s European settlement close.

“Treasuries are lower which will pull Bunds down, but the
focus will be on the Spanish supply which should get done with a
decent concession, and on the EU summit, although they are
probably just going to rubber-stamp what we know already,” said
a trader.

European Union leaders meet on Thursday to try to agree the
next steps in tackling a year-long debt crisis that has
enveloped Greece and Ireland and threatens to spread to Portugal
and Spain. [ID:nLDE6BE29I].

At 0704 GMT, March Bund futures (FGBLc1: ) were 30 ticks lower
at 123.93. Two-year bond yields (DE2YT=TWEB: ) were 3 basis points
higher at 1.098 percent, with 10-year yields (DE10YT=TWEB: ) 2.5
bps higher at 3.05 percent.

Spain will test sentiment towards the euro zone’s peripheral
issuers with the sale of up to 3.0 billion euros of 10- and
15-year bonds, the day after credit rating agency Moody’s said
it may downgrade the country.

Spanish 10-year bond yields (ES10YT=TWEB: ) were around 5.5
percent on Wednesday, up around 20 basis points since the start
of December.

“While the (auctions) have spooked the market for quite a
while, we have no doubts (they) will produce decent results,”
said Commerzbank rate strategist Marcel Bross.

“The scary part of them – the massive concession move in
Spanish government bonds beforehand – should be through and we
look for substantial relief in Spain and also Italy into and
over year end.”

Traders said there had been some small-scale European
Central Bank bond purchases of Irish and Portuguese debt on
Wednesday, which had helped to stabilise the periphery.

(Editing by John Stonestreet)

EURO GOVT-Bunds lower with Treasuries, Spanish auction looms