LONDON: German Bund futures rose in choppy trading on Friday as investors struggled to assess the long-term impact of the US Federal Reserve's decision to buy more Treasuries in a bid to stimulate the economy.
At the same time, bonds issued by Italy and Spain further recovered losses made early in the week as concerns eased that the resignation plan of Prime Minister Mario Monti would weaken Italy's resolve to reform.
German bonds fell at the open before recovering to leave futures 12 ticks higher on the day at 145.38.
The Fed said on Wednesday that it would buy $45 billion in Treasuries each month alongside an existing pledge to purchase$40 billion of mortgage-backed securities and would expand its purchases to include five-year notes.
"It's quite thin volumes out there. It's hard to read because you can say more quantitative easing is a good thing for the US economy and maybe we should be risk-on," said Rabobank strategist Lyn Graham-Taylor.
"But you can read it the other way too, that the economy is still struggling and it's a risk-off trade. I don't think the market has made up its mind particularly yet."
The additional Fed buying had been widely expected and priced in to markets, as indicated by the subdued reaction in equities. European stocks were slightly lower on the day after rallying for three weeks, with analysts citing concern over the still unresolved "fiscal cliff" in the United States.
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