LONDON, Jan 25 (Reuters) – German Bund futures rallied on Wednesday as uncertainty remained over the fate of crucial Greek debt swap talks and after the U.S. Federal Reserve said it will likely not raise interest rates until at least late 2014, even later than investors expected.

German Bund futures extended their gains in after-hours trading to a session high of 138.38 – more than 100 ticks higher on the day, in line with gains in U.S. Treasuries.

“The tone of the statement sounds more dovish than in December,” said Annalisa Piazza, a market analyst at Newedge Strategy.

The Bund had already risen to a settlement close of 137.82, before the Fed verdict, ending a four day run of losses. Ten-year Italian bonds came under pressure as appetite for risk waned, with yields rising 6.3 basis points on the day to 6.24 percent around the time markets settled in Europe.

Greece and its private creditors are struggling to reach an agreement on how to secure the large debt reduction Athens needs to make in order to win access to aid funds.

That has led to calls, notably from the International Monetary Fund, for the public sector to consider sharing the burden of losses needed to set Greece on a sustainable path.

That could include the European Central Bank which is estimated to have bought around 40 billion euros of Greek bonds since May 2010 in an emergency effort to stem pressure on the ailing sovereign.

LONDON, Jan 25 (Reuters) – German Bund futures rose and Italian bonds came under pressure on Wednesday as the recent run of risk appetite showed signs of breaking with investors taking a more cautious view of the fallout from Greek debt talks.

Greece and its private creditors are struggling to reach an agreement on how to secure the large debt reduction Athens needs to make in order to unlock access to aid funds.

That has led to calls, notably from the International Monetary Fund, for the public sector to consider sharing the burden of losses needed to set Greece on a sustainable path.

That could include the European Central Bank which is estimated to have bought around 40 billion euros of Greek bonds since May 2010 in an emergency effort to stem pressure on the ailing sovereign.

“The Greek newsflow was bad overnight and now the German press are running stories on the ECB having to write down their Greek bond holdings. The Greek deal is falling apart and it’s a massive blow to the ECB and the future of the SMP (bond-buying programme),” a trader said.

Markets had been sanguine over the slow progress towards a private sector deal, but the lengthy delays and risk that, faced with losses, the ECB could withdraw or cut back the support it provides to Italy and Spain, prompted fresh concern.

“I expect that the German, Dutch and Finnish (ECB) members might ask for a slowing or stopping in the process of the SMP,” said Alessandro Giansanti, strategist at ING in Amsterdam.

LONDON, Jan 25 (Reuters) – German Bund futures were steady on Wednesday with markets weighing upbeat corporate earnings and an improving economic outlook against the uncertainty surrounding ongoing Greek debt talks.

Investor demand for safe-haven German debt has eased over the past four sessions helped by positive economic data and solid performance of the euro zone’s lower-rated debt on the back of European Central Bank’s recent cash injections.

The German Ifo business sentiment indicator is forecast to give another sign of strength after above-forecast PMI data on Tuesday further dampened demand for low-yielding safe-haven assets.

“If we see a further upward surprise in the Ifo survey, easing fears of a German recession, then I think the 2 percent level is likely to be taken out,” said Nick Stamenkovic, strategist at RIA Capital Markets in Edinburgh.

However, with little sign of resolution to Greece’s crippling debt problems, 10-year Bund yields were little changed on the day at 2.001 percent, after failing to break decisively above that psychological barrier in recent sessions.

Traders cautioned that with many in the market positioned for an above-forecast Ifo reading, the likelihood of a sharp selloff in Bunds in the near-term was diminished.

Bund futures inched 3 ticks higher on the day to 137.33, finding resistance around the 55-day moving average of 137.42 — previously a support level that was taken out in falls seen on Tuesday.

LONDON, Jan 23 (Reuters) – Shrinking volumes for secured lending in the interbank market are symptomatic of the fractured trust between euro zone banks, and underscore the view that heavy reliance on the ECB will persist in the long term, analysts say.

The volume of trade in the repo market, where banks commonly use government bonds as collateral to raise funding, has fallen in recent months according to trading platform data.

Interdealer broker ICAP said repo volumes through its Brokertec platform were down by around 30 percent since the middle of the fourth quarter of 2011.

Average Italian repo volumes over electronic trading system MTS have also fallen in January compared to December, according to information published on MTS’s website.

Analysts said this reflected banks’ preference to use their collateral to draw long-term money from the European Central Bank rather than sourcing cash from the market.

“The recent reduction in volume seen across euro repo markets largely reflects the migration of collateral from the open market to the vaults of the ECB, via last December’s three-year (refinancing operation),” said ICAP analyst Chris Clark.

The decline in repo volumes affected both ends of the credit spectrum differently, Clark said, with investors preferring to hold onto low-risk German Bunds, whereas lower-rated collateral was safer to lend out to the ECB than to the market.

LONDON, Jan 20 (Reuters) – A second straight session of steep losses left German Bund futures on track for their biggest weekly fall in nearly two months as markets anticipated Greece would strike a deal on debt writedowns.

Signs of progress in negotiations between Greece and its creditors over how much of the country’s crippling debt can be written off looked to be edging towards a conclusion, easing the likelihood of a disorderly default in March.

That prompted a shift out of safe havens, sending Bund futures down by over a point to their lowest in two weeks at 137.86 and helping Italian and Spanish and other peripheral bonds to extend their recent outperformance.

“We’ve been building confidence in Greece and the IIF (Institute of International Finance) arriving at some conclusion over the last two sessions,” said Peter Chatwell, rate strategist at Credit Agricole in London.

The shift out of safe-havens and into riskier assets would probably continue if a deal did materialise, but with the success of a deal still dependent on successful implementation, moves could be limited in size.

“We can’t really go selling off Bund futures too hard and getting too optimistic because there’s still more twists and turns yet for this tale to take,” Chatwell said.

For an overview of the possible outcomes of the Greek debt talks see

LONDON (Reuters) – Greece must persuade its creditors to take a hefty loss on their investments in order to unlock the aid money it needs to stay afloat, but talks are proving tough, making a messy default in March a real prospect.

The struggling sovereign, also racked by a five-year-old recession, must strike a deal to reduce its towering debt stock by 100 billion euros to continue receiving bailout money from its European partners and the International Monetary Fund.

But private creditors are baulking at current proposals. Bondholders are thought to be a mix of mainly European banks, wincing at the prospect of further writedowns on their loans, and hedge funds who bought the bonds cheaply and are looking to maximize their return.

Sovereign wealth funds, insurers and Greek pension funds also hold Greek debt. Around 206 billion euros of bonds are considered eligible for the deal, meaning debtholders are facing a minimum writedown of 50 percent providing they all take part.

The European Central Bank has significant holdings but is not considered a private creditor and has said it is not involved in the negotiations.

The talks are likely to result in a default by some definitions. For a factbox on different interpretations of default, see:

Below are some of the possible outcomes of the talks:

LONDON, Jan 18 (Reuters) – Strong demand for ultra-low yielding German government debt underlined on Wednesday the high tension in markets as Greece resumed debt negotiations in an effort to avoid a messy default.

Greece’s last-ditch efforts to seal a deal with bondholders - needed to reduce its debt and secure vital aid funding – kept Bund futures near record highs as fear grew that failure could push the country into a disorderly default.

Talks between private sector creditors and officials resumed on Wednesday in a bid to break the deadlock over how big a loss investors are willing to take on their loans to Greece. .

“Discussions seem to be on a knife edge,” said Nick Stamenkovic, rate strategist at RIA Capital Markets. “The longer they go on then the more the market will suspect an agreement is not forthcoming as time is running out.”

IMF sources said the Fund estimated it would need $500 billion to lend to member countries with $100 billion as a “protection buffer”..

Attention turned to Spain, which sells up to 4.5 billion euros of longer-term bonds on Thursday, after shorter-dated auctions last week met with very strong demand.

Yields on the January 2022 10-year paper on offer were little changed at 5.46 percent. Traders believe Spanish banks are loading up on bonds eligible as collateral at the ECB’s next offering of three-year funds in late February.

LONDON, Jan 18 (Reuters) – Europe still has a chance of safely shepherding Greece through an increasingly inevitable default and could restore faith that investors can protect themselves against governments not repaying debt.

Time is fast running out. Greece cannot pay a 14.5 billion euro ($18.5 billion) bond falling due on March 20, and a deal with bondholders needs to come well before that, because the paperwork alone takes at least six weeks.

Many in markets would welcome an orderly default, whereby Greece’s lenders allowed it to renege on its commitments to repay, provided it avoids a far more painful hard default, which could herald the end of the single currency.

“People often ask if Greece is going to default which … is a misnomer because Greece is (already) defaulting,” said Richard McGuire, a strategist at Dutch bank Rabobank.

A managed default would trigger a pay-out of Credit Default Swaps (CDS), which offer insurance against default of a company or country, and would restore trust in these financial tools that are crucial for investors to hedge against risk.

“Regulators across the world would breathe a sigh of relief that hedges many of their regulated financial entities have on their European positions are effective,” said one market participant, asking not to be named.

The future of the market for sovereign CDS has been put in doubt because politicians were initially adamant banks and other investors should voluntarily swap their Greek bonds for new ones worth half the original value. Such a voluntary agreement would likely leave investors unable to claim the protection offered by CDS.

LONDON, Jan 18 (Reuters) – German Bund futures rose on Wednesday, supported by demand for low-risk assets as Greece resumes the difficult task of negotiating writedowns with private creditors in a bid to avoid a costly default.

Greece’s last-ditch efforts to seal a deal with bondholders – needed to reduce its debt and secure vital aid funding – were set to keep Bunds near record highs as fear grows that failure could push the country into a disorderly default.

Talks between private sector creditors and officials resume on Wednesday in an effort to break the deadlock over how much of a loss investors are willing to take on their loans to Greece.

“Everything is about Greece today… over the next three days these negotiations will drive the market,” said Achilleas Georgolopoulos, strategist at Lloyds Bank in London.

Any sign of a voluntary agreement would probably cool some of the safety bid for German debt, Georgolopoulos said, while tensions were likely to stay high if no deal is struck before next week’s regular meeting of euro zone finance ministers.

Bund futures rose to 139.89, up 21 ticks on the day and within half a point of the record-high 140.23 set last week.

A German auction of two-year debt later in the session will test how willing investors are to buy paper which carries an ultra-low yield but is perceived to be a safe haven owing to its high liquidity and the backing of the robust German economy.

LONDON, Jan 13 (Reuters) – Yields on Italian and French debt jumped on Friday after sources said that an anticipated wave of downgrades from Standard and Poor’s was due later in the day, sending safe-haven German bond futures to a record high.

Senior euro zone sources said several sovereign ratings would be cut by Standard and Poor’s, following through on a warning shot issued in December. One source said Germany and the Netherlands would retain their triple-A status.

That compounded negative market sentiment sparked by a sale of Italian bonds earlier in the day which failed to live up to high expectations set by a strong Spanish auction on Thursday.

Italian 10-year yields rose by as much as 17 basis points to 6.82 percent, reversing some of the large outperformance seen over the course of the week.

French, Spanish and Belgian debt – all also at risk of a downgrade – underperformed German Bunds, widening 10-year yield spreads by 15 to 25 basis points.

“Yes, this S&P move has been well-flagged… but this just illustrates how fragile the markets are, and the fact that the strength we’ve seen this week might be more down to ECB action than any underlying return of confidence,” said Elizabeth Afseth, analyst at Evolution Securities.

Later, the European Central Bank was seen buying Italian bonds and bringing yields off their highs.