LONDON: German Bund futures opened lower on Wednesday as investors edged away from safe-haven assets before a European Central Bank policy-setting meeting, though expectations of fresh monetary easing from the bank were limited.
A run of grim economic data and rising tension in financial markets over Spain's fragile banks and Greece's uncertain euro zone future has led markets to price in some possibility that the ECB will lower its refinancing and deposit rates.
However, most economists in a Reuters poll expect the central bank to hold fire.
"The timing of the ECB action is highly uncertain, given the exceptional accommodation already in place and the unique situation for both the future of the euro and stress on financial markets," said Annalisa Piazza, market economist at Newedge, who sees a 60 percent chance of a rate cut.
Bund futures slipped 37 ticks to 145.39, falling further away from record highs of 146.89 hit last week. Trading volume on Monday and Tuesday was limited by UK market holidays.
Appetite for risk has crept back in so far this week as markets take stock of the growing momentum behind calls for an international bailout for Spain's banks that does not put extra pressure on the government's finances.
On Tuesday Spain's treasury minister said the country was losing access to funding markets, and that the European Union should help to recapitalise its banks.
Any decision on how to help Madrid shore up its banks is likely to have to wait until the first phase of an independent banking audit is completed later this month, sources said.
Germany is due to sell up to 5 billion euros of five-year debt later in the day, testing the strength of demand for the low-risk assets which have been pushed to expensive levels by the recent rally in safe-havens.
Comments
Comments are closed.