Bunds dip as stocks stabilise, ECB purchases eyed

LONDON: Bund futures dipped on Monday, taking their cue from overnight trading which saw equities rebound after a hefty drop last week, with the day's focus set to fall on data revealing how heavily the ECB has been buying Italian and Spanish bonds.

The Bund future opened 16 ticks lower at 132.80, still finding support from investors concerned the euro zone's debt crisis may yet hit Italy and Spain despite the intervention of the European Central Bank.

Later in the day markets will be closely watching the ECB announcement of how much debt it bought last week to gauge how committed the bank was in its support of Italy and Spain.

Yields on Italian and Spanish bonds both fell to around 5 percent last week on the back of central bank buying aimed at stopping the spread of debt fears and stabilising markets.

Analysts were expecting at least 10 billion euros of purchases, and said a lower amount might raise concerns over how hard the ECB was prepared to fight any fresh upward pressure on yields when both countries resume issuing bonds.

"The more important question is how much money the ECB will have to commit in coming weeks in order to stop the inherent spread widening pressure as some investors are still looking for the exit door," said Commerzbank strategist Rainer Guntermann in a note.

Volatility was set to remain a key factor supporting safe-haven Bunds after sharp swings in equity markets last week pushed investors to stick to less-risky assets. The Bund future remained within two full points of all-time highs at 134.77.

Copyright Reuters, 2011