Bunds slip as Greece gets cash; Spain eyed

LONDON: German government bond yields edged higher at Thursday's open, retreating from record lows on short-term relief that Greece secured funds to meet bond repayments, whi le Spanish yields would come in focus after the country took over its fourth largest lender Bankia.

But Bunds were expected to resume their march higher as political deadlock in Greece increased the risk of insolvency and a possible messy exit from the euro zone. Th ere are also worries that Spain's efforts to help restore confidence on its banking sector could hurt the country's already deteriorating finances.

Safe-haven Bund yields struck new lows on Wednesday as investors stepped up their retreat from riskier assets.

Spain's economy ministry pledged late on Wednesday to do all it takes to clean up Bankia, which has more than 30 billion euros of exposure to troubled loans to property developers and repossessed land and buildings.

"There's some short-term relief, perhaps 1.5 percent was some kind of target for 10-years in the short-term but the peripheral news flow is deteriorating," a trader said.

"Bunds are not trading like the market is overly long and if money keeps coming out of these other (euro zone bonds) then yields can fall further."

June Bund futures were 23 ticks lower at 142.57, having risen to a record high of 143.03 on Wednesday.

UBS technical analyst Richard Adcock said a return above that level was likely and that could see Bunds rise as high as 144.04.

Ten- yields were 1.5 basis points higher at 1.538 percent.

Greek leftist leader Alexis Tsipras gave up his attempt to form a new government on Wednesday leaving Socialist leader Evangelos Venizelos to make a last-ditch attempt to form a coalition.

Greece averted an imminent funding crisis, however, after the board of the European Financial Stability Facility agreed to a scheduled 5.2 billion euro ($6.72 billion) payment . However, impatient governments withheld part of the latest tranche of rescue funds to be paid to Greece on Thursday.