LONDON: German Bund futures paused for breath on Wednesday before a sale of 10-year bonds which is expected to attract demand, particularly after a recent sell-off cheapened the paper.
Germany will sell 4 billion euros of July 2022 bonds later in the day, the only auction out of the euro zone this week.
Bund futures edged higher at the open and were last up 15 ticks on the day at 142.48. The contract had fallen almost three full points since last Thursday's European Central Bank policy meeting.
"(The auction) should have had a good concession given where the markets are," one trader said, referring to the cheapening of the paper ahead of the sale.
Risk sentiment has benefited in recent days from the prospect of eventual ECB intervention to buy Spanish and Italian bonds.
But underlying demand for safe-haven assets is likely to persist given the uncertainty surrounding any ECB action.
Bond-buying would only take place if Spain asks for help from the euro zone fund first - which means borrowing costs may have to rise further before anything happens - and there is uncertainty regarding the amounts that would be involved.
Still, Commerzbank says the rise in 10-year German yields may has a bit further to run. They were last at 1.48 percent.
"We feel that 10-year Bunds may well have another 10 basis points to correct towards the 1.55-60 percent area, before finding a firmer bid again," the bank said in a research note.
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