Bund dips as German vote on rescue fund eyed

LONDON: The German Bund future edged lower on Thursday on expectations that a German vote to ratify the euro zone rescue fund's new powers would be approved but caution before an Italian debt auction could limit falls.

While German opposition votes will ensure the EFSF bill likely passes, a big rebellion within Chancellor Angela Merkel's own centre-right coalition could weaken her politically and complicate future policy-making at a time when European officials are under pressure to take decisive action.

"There has been a lot of buying (of riskier assets) on optimism and nothing really else this week. At the end of the day all these potential changes are not going to happen overnight and the one thing that we haven't got is time," a trader said.

The German Bund future opened 10 ticks lower at 135.56.

The Bund has sold-off for four consecutive sessions, coming under pressure on hopes that EU officials are planning more decisive action to rein in the crisis, like a further boost to the EFSF. But official details have remained fleeting.

Italy's Treasury plans to sell between 5.5 billion and 9 billion euros in three-, five- and ten-year debt. While the sale is seen going smoothly, the country could pay a high premium to lure investors.

"Generally these things get away because the primary dealers will take it down," a trader said.