EURO GOVT-Bunds open lower, periphery to remain pressured

LONDON, March 25 (Reuters) – Bund futures opened lower on
Friday, as equities rose globally, while euro zone’s lower rated
bonds were set to remain under pressure as an ongoing EU summit
looked unlikely to come up with decisive anti-crisis measures.

At 0713 GMT, the Bund future (FGBLc1: Quote, Profile, Research) was 22 ticks lower at
121.98.

Tensions in the periphery caused by a government collapse in
Portugal, which was downgraded by two notches by Fitch and
Standard & Poor’s on Thursday, were capping losses for Bunds.

S&P said Portugal’s rating could fall further from BBB as
early as next week, depending on the final shape of the euro
zone bailout fund. [ID:nL3E7EO3OJ]

“We will follow up the story over the past few days (in
peripheral markets) and … you don’t want to be short of Bunds
going into the weekend,” one trader said.

Portugal’s political crisis was clouding a summit of
European Union leaders, who agreed to increase the capacity of
the EFSF rescue fund only by June, after having said for weeks
that they would agree a “comprehensive” package by the end of
March. [ID:nLDE72O009]

Portuguese yields hit fresh euro lifetime highs on Thursday,
with the ten-year paper (PT10YT=TWEB: Quote, Profile, Research) yielding around 7.9
percent, way above levels deemed sustainable.

Irish debt was also set to remain under pressure as an
agreement to soften its bailout terms looked unlikely.

German 10-year benchmark Bunds (DE10YT=TWEB: Quote, Profile, Research) yielded 2.5
basis points up on the day at 3.272 percent, while two-year
yields (DE2YT=TWEB: Quote, Profile, Research) were 2.8 bps higher at 1.711 percent.
(Reporting by Marius Zaharia; Editing by William James)

EURO GOVT-Bunds open lower, periphery to remain pressured