EURO GOVT-Bunds up as risk appetite wanes; respite temporary

LONDON, April 12 (Reuters) – German government bonds opened
higher on Tuesday, supported by a fall in equity markets and
other riskier assets after Japan raised the severity of its
nuclear crisis to the highest level.

Ten-year yields edged away from a key technical level at 3.5
percent but the respite was only expected to be temporary.
“It’s risk off this morning but Bunds aren’t reacting as
much as some other markets to the overnight news,” said a
trader.

“The market feels heavy and if it wasn’t for Japan we may
have broken through (3.5 percent), it feels like it wants to go
at some point.”

June Bund futures (FGBLc1: Quote, Profile, Research) were 20 ticks higher at 120.10.

Two-year bond yields (DE2YT=TWEB: Quote, Profile, Research) were down 1 basis point at
1.907 percent, with 10-year yields (DE10YT=TWEB: Quote, Profile, Research) down 1.2 bps at
3.48 percent.
The 3.5 percent level has held over the last two sessions,
but a break could open the way to the 3.70 percent area, the
61.8 percent retracement of the fall in yields between 2008 and
2010.

Portuguese bonds are expected to stay contained within
recent ranges as officials from the European Commission, the
European Central Bank and the International Monetary Fund
discuss technical details of bailout aid in Lisbon on Tuesday
[ID:nLDE7390BN].

In supply, the Netherlands will issue up to 2 billion euros
of 30-year bonds (NL44641=: Quote, Profile, Research) ahead of a sale of German 30-year
paper on Wednesday.

“The 30-year area on the Dutch curve does not look too
appealing versus the 10-year. Moreover, it does not look very
appealing versus the German curve,” said UniCredit MIB
strategist Chiara Cremonesi.

“However, it offers a yield of 4 percent, so it could be
interesting for some institutional investors (and) is the
highest yield at the 30-year maturity over the last year.”

(Editing by John Stonestreet)

EURO GOVT-Bunds up as risk appetite wanes; respite temporary