Bunds gains on rescue doubts

LONDON: German government bonds extended gains on Friday as an explosion in Oslo added to a safe-haven bid from markets questioning whether the euro zone debt crisis would be stemmed by the agreement of a second aid package for Greece.

Bund futures hit a session high of 127.82, 81 ticks higher on the day. Spanish and Italian bond yields rose, reversing earlier falls, with 10-year Italian yields up 13 basis points at 5.495 percent.

"The general feeling is the market is not entirely convinced about what came out in terms of the Greek situation.

There're still a lot of issues out there that have not been clarified in terms of how the EFSF (fund) is going to work," a trader said.

A huge explosion wrecked government buildings in central Oslo on Friday including Norwegian Prime Minister Jens Stoltenberg's office.

Copyright Reuters, 2011