RTRS: EURO GOVT-Bunds up with Treasuries after solid U.S. auction
Dec 30 (Reuters) - German government bonds opened higher on Thursday, pulled up a rally for U.S. Treasuries after a strong seven-year note auction, with dealers eyeing a sale of Italian longer-dated bonds.
The Treasury sale followed a disappointing 5-year offering on Tuesday and had the highest participation of indirect bidders since June 2009 as investors extended duration and offset short positions ahead of year-end.
March Bund futures FGBLc1 rose 60 ticks to 125.37. Two-year bond yields DE2YT=TWEB fell 2.4 basis points to 0.864 percent, with 10-year yields DE10YT=TWEB almost 5 bps lower at 2.96 percent.
Italy will sell up to 6 billion euros of 2013 and 2021 bonds as well as up to 2.5 billion euros of floating-rate certificates [ID:nRMERNE6BX].
Barclays Capital notes that both Italian bonds have underperformed not only Bunds, but also their Spanish equivalents since mid-December. "Past auction concessions have tended to reverse post the supply and thus we see room for some tightening in the next few days against both other peripherals and versus the ...core, especially as liquidity conditions normalise," Barclays Capital strategists said.
The sale comes after gross yields at an auction of zero coupon bonds and six-month bills on Wednesday spiked higher in the current holiday-thinned market [ID:nLDE6BR127].
