LONDON: German Bund futures opened lower on Tuesday with the country among the 15 warned by S&P that their credit ratings may be cut if EU leaders fail to agree on a comprehensive plan to resolve the region's debt crisis at a summit on Friday.
In the unprecedented move, Standard & Poor's said ratings could be lowered by one notch for Austria, Belgium, Finland, Germany, the Netherlands and Luxembourg, and by up to two notches for the remaining nine placed under review, including currently AAA-rated France.
S&P's warning came after a Franco-German initiative, to be discussed at the Friday summit, to impose budget discipline across the euro zone through treaty changes.
"If Germany loses its triple-A status, there could well be forced selling of Bunds, and Treasuries and Gilts will be the beneficiaries," said a trader.
"There's also the EFSF (euro zone rescue fund), if France and Germany are downgraded it definitely loses its triple-A rating."
December Bund futures were 34 ticks lower at 134.48, with benchmark 10-year yields up 2 basis points at 2.184 percent.
European shares were expected to halt a 1-1/2 week rally and the euro dipped.
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