EURO GOVT-Bunds open lower; Portugal T-bill sale in focus

LONDON, April 6 (Reuters) – Bund futures opened lower on
Wednesday, dragged down by weak U.S. Treasury markets, while
investors were watching a sale of Portuguese treasury bills
closely as pressure builds on Lisbon to seek financial aid.

At 0604 GMT, the Bund future (FGBLc1: Quote, Profile, Research) was 11 ticks lower at
120.82, tracking a fall in U.S. debt prices caused by
expectations that Federal Reserve officials will become
increasingly concerned about inflation [US/].

Portuguese yields have reached new euro lifetime highs on a
daily basis over the past few sessions as the country’s ratings
were massively downgraded after a government collapse pushed the
country in political limbo.

Analysts expect Portugal to manage to sell its 6- and
12-month T-bills, albeit at a higher cost. Local banks have
threatened to stop buying government bonds unless the country
seeks a foreign loan soon and the tender will test lenders
appetite to support shorter-term state borrowing.

“Given the fact that it’s bills, it might go ok, but it is
an interesting test for the periphery,” one trader said.
“Portuguese yields have a long way to go until they reach levels
were they stabilise.”

He said he expected Bunds to trade in recent ranges ahead of
Thursday’s meeting of the European Central Bank, which is
expected to raise interest rates by 25 basis points from the
current record low of 1.0 percent.

Benchmark 10-year Bund yields (DE10YT=TWEB: Quote, Profile, Research) were up 1.1
basis point at 3.403 percent, while the two-year Schatz yield
(DE2YT=TWEB: Quote, Profile, Research) was up 0.6 bps at 1.848 percent.

Germany auctions around 5.0 billion euros of Schatz notes
later in the day, while Finland plans to sell up to 1.5 billion
euros of 2016 and 2025 bonds.

(Reporting by Marius Zaharia; Editing by Patrick Graham)

EURO GOVT-Bunds open lower; Portugal T-bill sale in focus