LONDON: Bund futures opened higher on Tuesday, catching up with solid performance by US Treasuries in the previous session, with a sale of Spanish short-term bills the latest focal point for simmering peripheral debt worries.
The Bund future was last at 122.46, 15 ticks higher than Thursday's close, taking their direction from gains made by US Treasuries on Monday when European markets were closed.
Investors will watch Spain's sale of three- and six-month Treasury bills for signs of weakness after peripheral debt came under pressure across the board last week on growing talk that Greece would restructure its public debt.
Analysts saw little risk of low demand for the paper, though yields are expected to rise from a similar sale last month as unease about the euro zone's weaker economies continues to drive markets which are also pricing in more ECB rate hikes. Risk-aversion in the euro zone bond market has lifted safe-haven German Bund futures, leaving technical charts signalling room for further gains.
"Statistically, Bund sentiment has reached the most positive levels in eight months with a strong percentage of new highs versus lows indicating investors' increasing willingness to pay higher prices," said PIA First director Max Knudsen.
The outlook for Bunds was cautiously bullish while above their recent rising trendline at 121.73, Knudsen said, adding the contract could test last week's high of 122.65.
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