LONDON: German government bond futures rallied on Tuesday, edging up before a key ruling by the country's Constitutional Court to ratify the euro zone's rescue funds with the possibility of a delay to the decision keeping markets cautious.
Resurfacing worries over Greece, which acknowledged it was having trouble persuading its international lenders to accept a plan crucial to securing further loans also supported safe-haven Bunds, while British newspaper The Telegraph reported Spanish Prime Minister Mariano Rajoy would not accept a rescue that dictated spending cuts.
The Constitutional Court ruling which is due on Wednesday will decide if Germany can legally participate in the euro zone's permanent bailout fund, a vital decision as the ECB can buy government bonds only in conjunction with the bailout fund .
However, following a fresh complaint from a ruling party lawmaker against the ECB's bond buying, the court is expected to decide on Tuesday whether to go ahead with the decision on Wednesday or delay to consider the complaint. .
"Everyone still seems to think the court ruling will go through but there're worries about Greece leaving the euro again, Spain is playing hardball and I'm not sure the European Central Bank are ever going to actually buy bonds," a trader said.
"There's a lot of good news priced into the periphery."
December Bund futures were 62 ticks higher at 140.94.
The Netherlands will sell up to 2.25 billion euros of 10-year bonds, a day before elections in the country, mild concerns over which may dampen demand for the sale, analysts said.
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