EURO GOVT-Bunds rise with U.S. Treasuries; Spain yield higher

* U.S. buyback triggers recovery in global bond prices

* ZEW survey eyed for improving sentiment, risks to downside

* Spain sells T-bills, bond yields generally up

By William James

LONDON, Dec 14 (BestGrowthStock) – Bund futures rose on Tuesday,
regaining some ground on the back of a recovery in U.S.
Treasuries, with investors focused on the economic and fiscal
outlook for benchmark U.S. and euro zone issuers.

Spanish yields rose as a sale of 2.5 billion euros of
treasury bills showed it finding solid demand at high yields
that underline the tension still surrounding the euro zone’s
more heavily-indebted issuers. [ID:nEAP000939]

The Bund future (FGBLc1: ) was at 124.83, 26 ticks up on the
settlement close but broadly in line with after-hours trading.

After Monday’s European settlement, U.S. Treasury futures
(TYv1: ) recovered sharply, triggered by a Federal Reserve buyback
that brought investors back into the market. [US/]

“The rally in Treasuries has certainly been the driver in
the long end of bond markets globally in the last 24 hours. We
saw a very aggressive buyback by the Fed, which brought in dip
buying and that has then driven bunds higher,” a trader said.

The outperformance by U.S. debt narrowed the gap in yield
between Treasuries and Bunds with 10-year U.S. T-notes last
yielding 32 bps more than German debt. The spread had topped 40
basis points in the previous session.

Survey data from the ZEW think tank (1000 GMT) will provide
insight German investor morale, with a Reuters consensus of
analysts’ forecasts for the headline numbers showing an
improvement in sentiment and current conditions in December.

“We’re looking for a reasonable rebound, driven by the
current conditions,” a second trader said.Given the selloff
we’ve had in the last week there’s more chance of a reaction if
the figures come in on the downside.”

Spanish 10-year yields (ES1-YT=TWEB: ) rose 9 basis points on
the day to 5.572 percent, pushing the yield spread against Bunds
wider to 261 bps. They were little changed after the T-bill
sale. Madrid will issue longer-term debt later in the week.

A parliamentary confidence vote on Italian Prime Minister
Silvio Berlusconi due to take place later in the day was another
potential flashpoint for peripheral spreads.[ID:nLDE6BD0DF]

Analysts said political uncertainty in one of the region’s
largest debt issuers could quickly unsettle investors in other
higher-yielding euro zone debt.

FEDERAL RESERVE MEETS

Officials at the U.S. Federal Reserve meeting later in the
day are expected to assess its latest $600 billion bond-buying
programme but not signal any shift in its buying intentions,
even though a planned extension of tax cuts could provide a
boost to the economy. [nFEDAHEAD]

“I expect the statement will confirm the dovish stance of
the U.S. Federal Reserve, and probably highlight some concern on
jobs. I don’t expect that this will trigger any strong bullish
momentum, it will take time for the market to get more
constructive,” said Patrick Jacq, BNP Paribas rate strategist.

The 10-year German bond yield (DE10YT=TWEB: ) was 2.962
percent, down 1.2 basis points while the two-year Schatz yield
(DE2YT=TWEB: ) was 2.5 basis points lower at 1.39 percent.

(Reporting by William James; editing by Patrick Graham)

EURO GOVT-Bunds rise with U.S. Treasuries; Spain yield higher