LONDON: Bund futures opened lower on Thursday, giving back some of the solid gains made in the previous session, but uncertainty over whether Spain would ask for a bailout kept sentiment fragile in peripheral euro zone debt before an Italian auction.
Spain's Prime Minister Mariano Rajoy has said he is ready to seek a rescue package but only if debt financing costs remain too high for too long.
Those comments, published after anti-austerity protesters clashed with police in Madrid on Tuesday, were interpreted by markets as hesitation to make a move that would secure support from the European Central Bank.
On Thursday, Spain is expected to present its 2013 budget draft, which many market players had speculated that could form the basis of a potential bailout deal in the future.
"It's all a bit fragile, the crisis is back, Spain just looks in a mess," one trader said. "But we've had a very solid day yesterday backed by pretty decent flows."
At 0605 GMT, Bund futures were 23 ticks lower at 141.40. This compared with 5-1/2 month lows of 138.41 hit on Sept. 17. On Wednesday, the contract rose by around one-and-a-half points.
Italy will offer up to 7 billion euros of five- and 10-year debt later in the day, in an auction that is expected to be met by sufficient demand and should see lower borrowing costs for the sovereign.
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