LONDON: German government bonds rose on Wednesday, catching a bid as the recent rally in risk assets paused, but were expected to remain under some pressure with the European Central Bank seen taking action to contain the euro zone debt crisis.
European equities were poised to open lower after the US S&P 500 share index retreated from four-year highs hit on optimism the ECB will act to lower Spanish and Italian borrowing costs.
German Bund futures were 81 ticks higher at 142.19. The contract had sold off as much as 5.5 points over the last six weeks.
Germany will sell five billion euros of a new September 2014 bond, its second two-year issue to pay no interest to investors, with demand for low-risk liquid paper still high given the lack of clarity on any action the ECB may take.
"The ECB should find it difficult to top already increased expectations at its September meeting ... today's Schatz auction should provide a good opportunity to park some cash ... ahead of likely volatile September weeks," Commerzbank strategists said in a note.
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