LONDON: German government bonds were steady at Tuesday's open, pausing after rallying the previous day as relief over Greece's election results quickly gave way to mounting concerns that Spain may need a full bailout.
Greece's conservatives said they were poised to form a coalition government with the Socialists, easing fears that the country would leave the euro. Key now will be whether the country seeks to renegotiate its bailout deal.
Spanish bonds are expected to remain under pressure in the run-up to a bond auction on Thursday after 10-year yields shot well above 7 percent on Monday to their highest levels in euro-era history.
Madrid will get a taste of market sentiment towards its debt at a sale of 12- and 18-month bills on Tuesday, at which it is set to pay record prices to borrow.
"We're going to be watching Spain basically," a trader said. "The auctions will go OK, the dealers will see to that, but that's no indication there's any underlying demand."
The deteriorating euro zone crisis is expected to be reflected in a sharp drop in German investor sentiment when the ZEW survey is released at 0900 GMT.
An even worse than expected number should help Bunds extend recent gains, the trader said.
"Bund positions look a lot cleaner now after a lot of the longs were cleared out during last week's sell-off."
September Bund futures were 3 ticks lower at 142.61, with 10-year yields up a basis points at 1.423 percent.
Comments
Comments are closed for this article.