LONDON: German Bund futures rose near record highs on Monday and French bonds slipped as investors worried that a potential presidential election win by the French Socialists would compromise the euro zone's commitment to fight its debt crisis.
Dutch bonds are also seen under pressure after the Netherlands government failed to agree budget cuts, casting doubt on its support for future euro zone measures to contain the crisis.
French bond futures slipped after Socialist Francois Hollande won the first round of France's presidential poll though losses were expected to be tempered as incumbent Nicolas Sarkozy could still win a May 6 runoff if he gets the backing of the National Front candidate who had a surprisingly strong run.
"As much as there is a microcosm of relief that the second round will be contended by Sarkozy and Hollande it still puts France on a collision course with Germany over the future of the euro," said Marc Ostwald, a strategist at Monumement Securities.
"And it's not going to help resolve moving towards fiscal union and the market's concerns that the only solution is eurobonds."
The June Bund future was last 44 ticks up at 140.82, within sight of the all-time high of 140.86 hit last week. Cash German 10-year yields 2.6 basis points lower at 1.598, having come within a whisker or matching a record low of 1.593 plumbed last week.
French OAT futures were 35 ticks lower at 124.21 albeit in thin volumes.
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