LONDON: German bonds held steady on Friday, maintaining most of the week's gains as concern over the fallout from possible US spending cuts and Italy's political stalemate underpinned demand for low-risk debt.
Automatic spending cuts worth $85 billion are due to be introduced on Friday after US lawmakers failed to reach a deal to avert them.
The International Monetary Fund said on Thursday it would probably cut its 2013 growth forecast for the world's biggest economy by at least 0.5 percentage points if the cuts are fully implemented. The IMF now projects that the US economy will grow 2 percent this year.
"They (the US) haven't got a deal so in theory these spending cuts should come in, which has got implications for growth both in the US and elsewhere. I think the markets almost lost sight of that because of what's been going on in Italy," a trader said.
"Core markets are OK and I don't see any reason why they should sell off. I'm not convinced there's going to be any huge turnaround in Italian politics so we'll continue to play negative outlook on risk."
The Bund future was last flat on the day at 144.99, after hefty gains this week hoisted the contract to its highest in nearly two months. German 10-year yields were steady at 1.46 percent.
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