EURO GOVT-Bunds pause, downgrade may keep pressure on Ireland

LONDON, Nov 24 (BestGrowthStock) – Bund futures opened lower on
Wednesday, pausing after a strong rally in the previous session
and before a 10-year German debt auction, but with little end in
sight to the recent volatility in peripheral markets.

At 0705 GMT, the Bund future (FGBLc1: ) was 21 ticks lower at
128.67, under some pressure from a softer tone in U.S.
Treasuries after a weak auction on Tuesday.

Ratings agency Standard and Poors overnight cut Ireland’s
credit rating to A from AA- and placed the sovereign on
creditwatch negative, in a move which looked set to keep
pressure on the country high.

Ireland will later unveil a budget plan explaining how it
plans to save 15 billion euros over the next four years.
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“The downgrade overnight is not going to help the tone, it
was expected to a degree, but it was a double notch cut… it’s
not great. I think we know most of the budget details but Irish
political ramifications will remain in focus,” said a trader.

The currency bloc’s other peripheral states looked set to
remain under pressure, with investors seeing little reason to
ease the selling that pushed yields higher in the previous
session.

Dealers said Bund futures’ rally of more than 100-ticks on
Tuesday did not make it so expensive as to threaten the launch
of a new 10-year German Bond, expected to find solid demand from
investors looking for shelter from volatile peripheral markets.

“You can’t say that Bund levels are particularly stretched
at the moment, and you have to say we can go a bit further after
yesterday’s rally,” the trader added.
The 10-year German bond yield (DE10YT=TWEB: ) was 2.572
percent, up 2.3 basis points while the two-year Schatz yield
(DE2YT=TWEB: ) was flat at 0.926 percent.

(Reporting by William James; editing by Patrick Graham)

EURO GOVT-Bunds pause, downgrade may keep pressure on Ireland