Wednesday, 30 January 2013 14:15
LONDON: German Bund futures fell on Wednesday as investors made room for a sale of long-dated German paper and prepared for solid demand at an Italian debt auction.
Italy will offer up to 6.5 billion euros of bonds maturing in 2017 and 2022 in an auction expected to be well-received after improved sentiment towards lower-rated debt secured a stellar start to Italy and Spain's 2013 funding.
German Bund futures were 21 ticks lower on the day at 141.61, with technical charts pointing to further weakness.
"Given the still ongoing hunt for yield environment, we would expect more and more investors to be more open-minded also for longer maturities in the Italian curve," Rainer Guntermann, strategist at Commerzbank said.
Against this backdrop, he recommended investors put on flattening trades on the Italian yield curve, favouring longer-dated bonds expecting that their yields would fall faster than short-dated ones.
In the secondary market, 10-year Italian yields were flat ...