LONDON: German government bond prices fell on Tuesday after Greece's international lenders sealed an aid deal to avert near-term bankruptcy but doubts about some of the measures tempered the sell-off in low-risk debt.
The accord will cut Greek debt by 40 billion euros to reduce it to 124 percent of gross domestic product by 2020. It eases the way for Athens to receive its next aid tranche in mid-December, removing fears of an imminent default.
The relief lifted demand for riskier assets such as equities and kept yields on 10-year Greek bonds near their lowest since the country's debt restructuring in March.
The German Bund future fell nearly 60 ticks to a session low of 141.84 in early trade but the losses were quickly halved as doubts about the deal emerged. The contract last stood stood 24 ticks down on the day at 142.19.
"Too much (of the deal) has been anticipated, It's not a real game-changer. We expect some upside pressure on Bund yields but not a sustained sell-off," said Michael Leister, a senior rate strategist at Commerzbank.
German 10-year yields were last up 2 basis points on the day at 1.44 percent.
They have risen over the past two weeks from a 2-1/2 month low of 1.315 percent as investors anticipated that Greece's lenders would eventually compromise on a deal to keep the debt-stricken country afloat.
Bund yields are likely to remain in the tight 35 bps range that has prevailed over the past month as questions remain on how some of the Greek measures will be implemented, traders and strategists said.
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