Bunds creep lower, Greek fallout to support

LONDON: Bund futures crept lower on Monday after a sharp rally in the previous session but disagreements over a solution to the Greek debt crisis and concerns over the global economy should limit the downside.

The September Bund future was 10 ticks lower at 125.78 as investors cashed in on 70 ticks of gains in the previous session.

But a stalemate over the form which a Greek debt restructuring should take would likely continue to offer the market some support as investors also braced for a bout of economic data out of the United States this week.

"The stand-off between politicians and (ECB President Jean-Claude) Trichet continues," said a trader in London.

"Bunds are well-underpinned for some time."

German lawmakers last week backed more aid for Greece in a non-binding vote after getting assurances from Finance Minister Wolfgang Schaeuble that private creditors would share the costs of a new rescue package, but rating agencies have warned against the consequences of a debt restructuring.

Safe-haven assets could also find support from a series of US data this week which will show whether the economy is struggling with a soft-patch or a downturn.

"The risk is that we continue to see the data slowing down a bit. It's another potential support for the market," the trader added.

Copyright Reuters, 2011