Greece’s battle to avoid default still dominates sentiment
with Bund futures falling 15 ticks to 137.69 as markets
cautiously anticipated the release of bailout funds, despite
Greek leades failing to agree their part of the deal.

Spanish 10-year yields were 12.5 basis points
higher on the day at 5.368 percent after the country continued
its aggressive fund-raising activity with an unexpected
syndicated debt sale on Wednesday.

“It’s a supply overhang. The deal was cheap and has repriced
the whole market. People got their full allocations, from what
I’m hearing,” a trader said.

Nevertheless, market participants said the Spanish sell-off
could be short-lived if Greece secured the international aid it
badly needs, reducing the risk of a messy Greek default and the
subsequent contagion.

“Certainly, that (an agreement) would be risk positive and
there still would be a knee-jerk reaction,” said Peter Chatwell,
rate strategist at Credit Agricole in London.

Euro zone finance ministers, due to meet on Thursday
evening, had hoped for a complete agreement from Greek party
leaders on budget cuts to speed approval of the 130 billion euro
bailout, the country’s second.

But, despite agreeing most of the required cuts, Finance
Minister Evangelos Venizelos left Athens for the Eurogroup
meeting in Brussels with one issue unresolved.

Nevertheless, markets took the fact that a single hurdle
remained in the drawn-out process of agreeing the reforms
demanded by international lenders was as positive. An accord has
been priced in over recent days, with safe-haven German yields
ticking higher.

“Our target is that the (10-year) yield should be in the
area of 2.15 percent so we see some pressure to the upside if
there is a positive outcome to the Greek debt situation,” said
Alessandro Giansanti, rate strategist at ING in Amsterdam.

The 10-year yield was last at 1.985 percent, 1
basis point higher on the day and still struggling to break
conclusively above the 2 percent level which has formed the
upper end of a roughly 20 bps range seen since the start of the
year.

CENTRAL BANK SIGNALS

The European Central Bank’s policy meeting later in the day
was set to play second fiddle to developments in the Greek saga,
with few expecting the bank to cut interest rates or announce
new liquidity measures to support the banking sector.

The ECB may, however, indicate its willingness to cut rates
at next month’s meeting. Its reluctance to pre-commit on rate
cuts meant the main risk was that it would rule out a cut,
leading to a pricing out of the partial expectations indicated
by Euribor futures prices .

“If today they exclude any possibility of a rate cut, the
market can sell off, particularly at the front end,” ING’s
Giansanti said.

The bank was also expected to face questioning over whether
it was considering taking losses on its holdings of Greek
government bonds to help ease Athens’s debt burden with any sign
of concession being taken as a positive for riskier assets.

“Anything that would lower the debt burden on Greece would
be viewed as a market positive,” Credit Agricole’s Chatwell
said.

The Bank of England was also meeting, with widespread
expectations it will announce fresh quantitative easing leaving
UK bond markets vulnerable to disappointment. This may in turn
add to downward momentum in Bunds prices.

Plans to leverage the fund’s capacity and give it more firepower to prevent the spread of the debt crisis were also progressing, with the first of two mechanisms it could make use of expected to be in place by the end of the month, according to the source with direct knowledge of the matter.

The European Financial Stability Facility (EFSF) is currently weighing its options and could issue a new T-bill in the third week of February or undertake a new syndicated bond issue, the source said.

Europe’s rescue fund raised 3 billion euros in January as confidence returned to the bond markets and the euro zone crisis abated.

The huge injection of liquidity into the European banking system by the European Central Bank at the end of December has also contributed to more favourable market conditions for issuers.

The EFSF would not just eye the three-year part of the curve, where liquidity has been abundant, but longer maturities as well.

“The impact of the LTRO (long-term refinancing operation) has also been on the five-year sector,” an EU source said. “There is strong demand for long dated paper and investors are starving for yield.”

The EFSF can issue up to 30-year maturities, although its longest bond to date is 10 years. The EU successfully tapped into long dated investor demand in January when it priced its inaugural 30-year bond.

LEVERAGE PLANS PROGRESS

The source also said that the EFSF hopes to have a guarantee scheme in place by the end of the month that would, if needed, insure around 20-30 percent of a country’s bonds – the first of two planned mechanisms to leverage the fund’s capacity and provide a firewall against the spread of sovereign stress.

The guarantee certificates would be issued by the EFSF separately to the bond, allowing the insurance to trade independently and act as protection against a default on all holdings of existing bonds from the issuer — avoiding the problem of a two-tiered market.

A second scheme, to provide an investment vehicle which would see the EFSF stomach the first slice of any losses on a portfolio of euro zone sovereign bonds, was likely to be up and running sometime in March.

“The fund would invest in bonds of the country in secondary or primary markets, and if there was a default on those bonds … we would take the first loss,” the source said.

Both schemes could be deployed to provide support for sovereigns not in receipt of bailout programmes, but experiencing difficulty raising funds on the market.

“We will be ready very soon, which is not to say that we would do anything yet, because we need to wait for the country to ask for assistance,” the source said.

A country would need to request help and receive approval from member states before either option could be used to provide assistance.

FUNDING FLEXIBILITY

Meanwhile, the EFSF will be given more flexibility in its access to bond markets and will be able to raise money well in advance of when it has to be paid out. This change is expected to go through before the end of the month.

So far, the borrower has been hostage to market conditions when it has needed to bring deals. In November, the issuer had to delay a bond issue by a week as market conditions made it difficult to raise funds.

While pre-funding has the benefit of being able to access bond markets when conditions are at their best, it is also tricky as it mean having to park in very safe assets.

“As a result of this, the EFSF may have to face a negative carry and the EFSF needs to find a way to charge for this,” the source said. “Even if it comes at a certain cost, it is beneficial to be able to maintain some kind of liquidity buffer.”

(Reporting by William James at Reuters, and Natalie Harrison and Helene Durand at IFR; Editing by Andrew Hay)

Plans to leverage the fund’s capacity and give it more firepower to prevent the spread of the debt crisis were also progressing, with the first of two mechanisms it could make use of expected to be in place by the end of the month, according to the source with direct knowledge of the matter.

The European Financial Stability Facility (EFSF) is currently weighing its options and could issue a new T-bill in the third week of February or undertake a new syndicated bond issue, the source said.

Europe’s rescue fund raised 3 billion euros in January as confidence returned to the bond markets and the euro zone crisis abated.

The huge injection of liquidity into the European banking system by the European Central Bank at the end of December has also contributed to more favorable market conditions for issuers.

The EFSF would not just eye the three-year part of the curve, where liquidity has been abundant, but longer maturities as well.

“The impact of the LTRO (long-term refinancing operation) has also been on the five-year sector,” an EU source said. “There is strong demand for long dated paper and investors are starving for yield.”

The EFSF can issue up to 30-year maturities, although its longest bond to date is 10 years. The EU successfully tapped into long dated investor demand in January when it priced its inaugural 30-year bond.

LEVERAGE PLANS PROGRESS

The source also said that the EFSF hopes to have a guarantee scheme in place by the end of the month that would, if needed, insure around 20-30 percent of a country’s bonds – the first of two planned mechanisms to leverage the fund’s capacity and provide a firewall against the spread of sovereign stress.

The guarantee certificates would be issued by the EFSF separately to the bond, allowing the insurance to trade independently and act as protection against a default on all holdings of existing bonds from the issuer — avoiding the problem of a two-tiered market.

A second scheme, to provide an investment vehicle which would see the EFSF stomach the first slice of any losses on a portfolio of euro zone sovereign bonds, was likely to be up and running sometime in March.

“The fund would invest in bonds of the country in secondary or primary markets, and if there was a default on those bonds … we would take the first loss,” the source said.

Both schemes could be deployed to provide support for sovereigns not in receipt of bailout programs, but experiencing difficulty raising funds on the market.

“We will be ready very soon, which is not to say that we would do anything yet, because we need to wait for the country to ask for assistance,” the source said.

A country would need to request help and receive approval from member states before either option could be used to provide assistance.

FUNDING FLEXIBILITY

Meanwhile, the EFSF will be given more flexibility in its access to bond markets and will be able to raise money well in advance of when it has to be paid out. This change is expected to go through before the end of the month.

So far, the borrower has been hostage to market conditions when it has needed to bring deals. In November, the issuer had to delay a bond issue by a week as market conditions made it difficult to raise funds.

While pre-funding has the benefit of being able to access bond markets when conditions are at their best, it is also tricky as it mean having to park in very safe assets.

“As a result of this, the EFSF may have to face a negative carry and the EFSF needs to find a way to charge for this,” the source said. “Even if it comes at a certain cost, it is beneficial to be able to maintain some kind of liquidity buffer.”

(Reporting by William James at Reuters, and Natalie Harrison and Helene Durand at IFR; Editing by Andrew Hay)

Greece’s government is preparing a document to present to
political leaders for approval, potentially taking the country
one step closer to a 130 billion euro bailout deal needed to
avert the chaos of a debt default in March.

Confirmation of an accord, which could come as early as
Tuesday evening, may spark a rally in the region’s more risky
bonds, driving Spanish and Italian borrowing costs lower and
pushing Bund yields higher towards a fresh test of the 2 percent
level.

Even the prospect of an agreement later in the day was
enough to prompt investors to cut their holdings of low-risk
German Bunds and reduce the risk premium on Italian debt to its
lowest since the end of October.

“It’s really all about Greece and speculation there:
expectation is building that they will cobble something together
because the consequences of them not are pretty gloom and doom
for all of us,” a trader said.

The March Bund futures contract reversed earlier
gains to hit a low of 137.83, down 80 ticks on the day.

Bunds could fall as far as the Jan. 24 low of 137.18, having
broken through resistance at 138.13 – the bottom of Friday’s
selloff, UBS technical charts suggested.

Yields on 10-year Italian debt fell to 5.61
percent, narrowing the yield spread over German Bunds
to a three-month low of 364 basis points.

Any Greek deal is likely to spur more spread-tightening.

“It will be a relief sell-off in the core and a relief rally
in the periphery,” said Achilleas Georgolopoulos, strategist at
Lloyds Bank in London.

“It won’t be a massive reaction but we can easily see
another five to 10 basis points Bunds higher tomorrow, provided
we get the announcement they agreed.”

The extent of the selloff was likely to be capped by the
many unanswered questions surrounding Greece’s battle to avoid a
default — including whether the country can successfully
execute a deal with private bondholders to writedown their debt.

“There will be a lot of uncertainty until we get a
resolution on the PSI (private sector involvement) front too.
It’s a complex situation with a lot of moving parts and players
and I think the market will remain jittery for some time yet,”
the trader said.

That meant the 1.8 percent to 2 percent range which has
largely contained 10-year German Bund yields throughout January
was likely to hold in the short term, market participants said.

PORTUGAL PROBLEMS PERSIST

Portuguese bonds were steady after the ECB started buying
the debt in recent days to stem a sell-off that sent yields to
euro-era peaks on concerns Portugal could be the next to follow
Greece into seeking a second bailout and debt restructuring.

Its yield curve remained inverted, with two-year bonds
yielding over 2 percentage points more than 10-year paper,
reflecting persistent investor worries that they may not get
their money back.

“Although Portugal is no Greece, nevertheless there are
justifiable concerns. Without significant structural reform and
a substantial internal devaluation, the economy simply lacks the
necessary wealth creation to underpin a meaningful recovery,”
said FxPro chief strategist Michael Derks.

“Despite yesterday’s vehement denials from the Finance
Ministry, a significant debt restructuring is highly likely at
some point in the next couple of years.”

Prices showed the predicted path of overnight bank to bank
lending rates – which are typically closely correlated with the
ECB refinancing rate – was broadly flat over the first half of
the year.

Analysts expect ECB President Mario Draghi to praise the
impact of steps taken in December which have boosted banks’ cash
buffers with half a trillion euros of three-year loans, unfrozen
bank funding markets and pushed interbank borrowing rates lower.

“Currently there is not the need for the ECB to come up with
more ideas,” said Kornelius Purps, strategist at Unicredit.

“The risk that banks will face serious difficulties in
getting their business funding has been trimmed extremely
successfully.”

Reflecting this view, measures of counterparty stress in the
bank-to-bank lending market eased further. The Libor/OIS spread
narrowed to stand at 68 basis points, down from more than 90 bps
in December, and forward markets pointed to a spread of around
40 bps by year-end.

The central bank will hold on Feb. 29 a second offer of
three-month loans, which is expected to add to the large surplus
of long-term cash in the euro system.

A Reuters poll of money market traders showed banks were
expected to borrow 400 billion euros at the operation.
Speculation last month had been of a take-up as high as a
trillion euros though money market players generally expect a
lower figure.

Analysts said the ECB was unlikely to announce more loan
tenders at Thursday’s policy meeting, preferring instead to take
a wait-and-see approach on whether December’s strong demand
would be matched at the Feb. 29 long-term refinancing operation
(LTRO).

“They could well say that we are riding the LTRO wave and
sentiment in the market has improved a bit, so why spend the
last ammunition they have at their disposal?,” said Elwin de
Groot, senior market economist at Rabobank in Utrecht.

RATE EXPECTATIONS

Prices showed markets were not expecting a change in the
ECB’s main refinancing rate, although there were tentative signs
that some investors were looking to hedge against a surprise
cut.

March Euribor futures rallied last week, suggesting
some were positioning for a drop in interbank rates as a result
of an interest rate cut.

The contract was last trading at 99.1, implying an expected
three-month Euribor rate of 0.9 percent by March – well below
the current fixing of 1.094 percent. The ECB’s
refinancing rate currently stands at a record-low 1 percent.

“Basically that suggests the market thinks that three-month
Euribor rates will fall below 1 percent and part of that could
be driven by expectation of another rate cut,” de Groot said.

Nevertheless, he cautioned that the Euribor contract
contained a risk premium and the rally did not imply a strong
conviction for a rate cut.

Economists at RBC Capital Markets expected rate cuts in the
coming months, but said more evidence was needed on how the
ECB’s policy easing was impacting the euro zone economy.

“If the ECB succeeds in easing funding conditions for banks
in the periphery and if that translates into stronger credit
supply, then that in itself should spur activity and inflation,”
the bank said in a note.

“In those circumstance, there would be less need for further
rate cuts.”

Ten-year Portuguese bond yields hit a euro-era
high of more than 17 percent on Monday, matching levels seen in
Greece five months ago.

When Greek yields were last at 17 percent, in
August, Athens was already negotiating a deal with private
creditors to accept a loss on their bondholdings – dubbed
private sector involvement (PSI) – which was needed to unlock a
second infusion of bailout cash.

With yields at such high levels, Greece was frozen out of
debt markets and had to ask for extra funding when it became
clear it would not be able to raise money from investors once
its aid package was exhausted.

Portuguese bond prices – 10-year paper trades at just 42
percent of face value – suggest investors do not expect to get
all their money back and that the government will be forced to
seek a restructuring of its debt.

“At some point you have a deadline looming where the bailout
package assumes a return to the bond market… for now the path
of least resistance seems to be more repricing towards a
potential Greek-style PSI,” said David Schnautz, strategist at
Commerzbank in London.

Portugal is scheduled to resume selling bonds in 2013 under
the terms of its current 78 billion euro bailout.

European leaders approved new measures intended to prevent a
repeat of the massive overspending that contributed to the
current crisis, giving risk sentiment a lift, but differences
remained over the limits of austerity.

In Greece, Prime Minister Lucas Papademos said he hoped to
reach deals by the end of the week both with its private
creditors over restructuring 200 billion euros of debt and with
its international lenders on conditions tied to a second
bailout.

That eased some of the recent pressure on Portugal, which
has been seen as next in line after Greece for requiring a
second bailout. Ten-year Portuguese government bond yields
tumbled 67 basis points, but at 16.73 percent they
remain prohibitively high.

“We are seeing Portugal very much under the cull still so
that obviously should get more and more difficult for the market
to shrug off,” David Schnautz, interest rate strategist at
Commerzbank said.

German Bund futures fell 39 ticks on the day to
139.28 but still within sight of a record high of 140.23.

“We are flirting with a real attack on the 140 level in Bund
(futures)… we just touched 1.80 in the 10-year yield and there
seems to be something of a resistance there, (but) we have
already seen buying on dips,” Schnautz added.

Ten-year German government bond yields rose
4.4 basis points to 1.83 percent.

“There’s a bit of relief and a bit of a technical reaction
given the Bund is reaching critical levels… but from our point
of view (the pullback) doesn’t really look convincing,” said
Michael Leister, strategist at DZ Bank.

UBS technical analysis suggested the outlook remained
bullish for German debt, while the contract traded above 138.78
- the 38 percent Fibonacci retracement of the rise since Jan 24.

LIMITED RELIEF

Progress towards tighter fiscal union was likely to be
interpreted by investors as a long-term positive.

The EU agreement was seen helping stall Monday’s selling
pressure on Italian debt. Ten-year yields fell 6.4 bps on the
day to 6.04 percent, while two-year Portuguese
bond yields shed 11 bps to 21.14 percent.

But short-term worries over Greece and Portugal were set to
slow the momentum behind a broad move into riskier assets seen
since the European Central Bank flooded the market with cash in
December.

“People are still generally taking a positive view (on Spain
and Italy), but we’re getting down to some big levels where
people are more comfortable trimming back their longs and maybe
putting on some shorts,” a trader said.

Ten-year Spanish government bond yields were
up 1.3 basis points at 4.82 percent.

In a further sign of ongoing risks to the euro zone,
unemployment remained high, underscoring the difficulty the
region is having balancing its austerity drive with growth.

Euro zone unemployment has risen to its highest level since
the euro single currency was introduced, data showed on Tuesday,
a day after EU leaders promised to focus on creating millions of
new jobs to try to kickstart Europe’s floundering economy.

Seasonally adjusted unemployment among the 17 countries
sharing the euro rose to 10.4 percent in December.

European leaders approved strict new measures on sovereign
budget discipline, intended to prevent a repeat of the massive
overspending pushing some to sell bonds of higher-risk euro zone
states.

In response, the price of German debt futures
slipped 22 ticks to 139.45 as demand for the one of euro zone’s
safest and most liquid assets eased from recent extremes.

“The move that we are seeing is based on the idea that at
least the politicians didn’t disappoint investors too much. In
terms of new information, there wasn’t that much from the
summit,” said Michael Leister, strategist at DZ Bank.

“There’s a bit of relief and a bit of a technical reaction
given the Bund is reaching critical levels… but from our point
of view (the pullback) doesn’t really look convincing.”

On Monday, the contract rose close to its record high of
140.23 after a recent slew of rating downgrades and with markets
targeting Portugal as the bloc’s next weakest link behind
Greece.

UBS technical analysis said the outlook remained bullish for
German debt while the contract traded above 138.78 – the 38
percent Fibonacci retracement of the rise since Jan 24.

LIMITED RELIEF

Portuguese short-dated bond yields rose further, showing the
market’s pessimism over the country’s grim economic outlook and
its ability to meet bond repayments without fresh aid or a debt
restructuring.

Nevertheless, progress towards tighter fiscal union was
likely to be interpreted by investors as a long-term positive.

The EU agreement was seen helping stall Monday’s selling
pressure on Italian debt. Ten-year yields fell 8 bps on the day
to 6.02 percent while the Spanish equivalent
eased 2.5 bps to 4.79 percent.

But short-term worries over Greece and Portugal were set to
slow the momentum behind a broad move into riskier assets seen
since the European Central Bank flooded the market with cash in
December.

“People are still generally taking a positive view (on Spain
and Italy), but we’re getting down to some big levels where
people are more comfortable trimming back their longs and maybe
putting on some shorts,” a trader said.

Greek Prime Minister Lucas Papademos said talks between
Greece and its private creditors had made significant progress
and that the aim was to reach a definitive deal by the end of
the week.

Markets were likely to take comfort from any further signs
of progress in the talks, although relief would be limited by
the knock-on effect to Portugal, where many now see a similar
writedown of public debt as inevitable.

Portuguese two-year bond yields rose 36 basis
points on the day to 21.6 percent, reflecting near term
concerns. Ten-year yields eased back from their
euro era highs, falling 14 bps to 17.25 percent, unwinding only
a fraction of the 185 bps rise seen on Monday.

Business and consumer confidence also hit record lows, the
latter battered by the lower salaries and across-the-board tax
hikes that were part of Portugal’s painful austerity programme.

Banks and others offering default insurance to holders of
Portuguese sovereign debt have begun demanding huge up-front
payments rather than allowing costs to be spread over the term
of the contract.

On Monday, this meant that it cost a whopping 3.95 million
euros to insure 10 million euros in bonds over five years,
payable now.

It made Portugal the second-highest sovereign to insure in
the world, after Greece, and implied a huge lack of confidence
in market circles about Lisbon’s future.

While Italian and Spanish borrowing costs have fallen,
Portuguese bonds have come under intense pressure from investors
after Standard & Poor’s downgraded 15 euro zone countries
earlier in January, putting Portugal in the “junk” category.

Its already soaring 10-year bond yields surged
on Monday by 171 basis points to 17.353 percent, suffering their
third worst day in the euro era and adding to expectations that
Lisbon will have to get a second bailout from the European Union
and International Monetary Fund to go with the 78 billion euro
package it has already been handed.

There is also increasing concern that Portugal will be
forced to restructure its debt like Greece, even though its debt
levels of around 105 percent of gross domestic product are much
lower than Greek ones.

In Brussels for an EU summit, Portuguese Prime Minister
Pedro Passos Coelho pinned the blame on a failure to sort out a
second Greek bailout, for his country’s troubles.

“The Greek situation continues, after all this time, to be
the main factor of instability,” he told reporters. “It would be
very good for everybody in Europe and for Portugal that the
situation in Greece is resolved as soon as possible.”

LACK OF CONFIDENCE

The decline in business and consumer confidence reflected
both Portugal’s dire economic condition and the pain of
austerity imposed as a condition of its first bailout.

The economic climate indicator, which measures business
confidence, slumped to minus 4.7 in January from minus 4.4 in
December, the National Statistics Institute said. A year ago it
stood at plus 1.6.

INE said its consumer confidence indicator fell to a
negative reading of 57.1 in January – also the lowest on record
- after minus 56.8 in December.

“For consumers, we couldn’t expect anything else, the start
of the year brought more unemployment and higher taxes and
obviously that is reflected in confidence,” said Filipe Garcia,
economist at Informacao de Mercados Financeiros.

Meanwhile, the demand for so-called up-front payments on
bond insurance policies, or credit defaults swaps (CDS) showed a
growing distrust among banks of Portugal’s ability to pay its
debts.

Prices are quoted up front when they reach extreme levels
and require the buyer of protection to pay a single lump sum
instead of annual premiums.

Up-front payments for Greece began in September last year.

Investors were demanding an annual return of more than 17
percent – the most since the launch of the single currency – to
buy 10-year Portuguese debt in the secondary market, sending
bond prices tumbling to around 40 percent of their face value.

The grim perception of Portugal’s ability to overcome a poor
economic outlook and repay its debts meant that underwriters of
insurance on its bonds saw a high enough chance of a default to
demand payment up front on new contracts.

“Portugal is the new Greece… People have learned their
lesson with Greece and I think they will keep (Portugal) in the
firing line for now,” a trader said.

Traders also pointed to a fresh round of forced selling,
with some index-linked investors having to ditch the bonds from
their portfolio before month-end after Standard and Poor’s
became on Jan. 13 the third rating agency to give Portugal a
junk rating.

Ten-year Portuguese yields rose by 171 basis
points to 17.353 percent, suffering their third worst day in the
euro era.

ITALY QUESTIONS PERSIST

Italian yields also rose, unwinding some of their recent
strong performance ahead of an auction of five and 10-year debt.
The move showed that demand for the country’s bond remained
fragile despite the positive impact that European Central Bank
efforts to flood banks with cash have had on the market since
December.

The auction results failed to live up to a recent run of
very successful short-term debt sales, but did not prompt a
fresh round of selling to add to the pre-auction moves.

“The re-openings all show the favourable trend of declining
yields remains intact and, moreover, demand has been solid
enough to firm the market up post-auction,” said Peter Chatwell,
strategist at Credit Agricole.

Lower yields highlighted the recent easing of borrowing
costs, but analysts said demand for longer-dated debt was yet to
provide complete reassurance over the country’s ability to fund
itself.

Italy sold its 10-year benchmark bond at a gross yield of
6.08 percent, while a new five-year bond was sold at 5.39
percent.

BUNDS BENEFIT

As investors turned their back on riskier assets, safe-haven
German Bund futures rose sharply to within sight of
record highs. The contract set a session high of 139.77, up
nearly a full point and close to the Jan. 13 peak of 140.23.

The rise may extend on Tuesday as Greece battles to secure
an agreement with private creditors over how to writedown their
outstanding debts and avoid default.

The outcome of a summit of euro zone leaders was expected to
reveal little to calm the market, market participants said.

“Until they get the Greek deal out of the way with a decent
result then I think markets are going to be slightly averse to
piling on a load more risk,” said Eric Wand, strategist at
Lloyds Bank in London.

“Core markets have come a hell of a long way. We had a
little retracement this afternoon, but came back bid and that
tells you they have decent support.”