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Highly liquid Bunds stabilised after the White House dismissed proposals by Republicans for steep spending cuts, heightening fears that US lawmakers will not manage to achieve a deal to avert recession-inducing fiscal tightening in the world's biggest economy.
"The fiscal cliff debate rumbles on...the growth implications if they don't get something sorted out are fairly severe and as long as that remains in play core markets remain reasonably well supported," a trader said.
The Bund future was last two ticks lower at 142.49 compared with 142.51 at Monday's settlement.