LONDON, Oct 13 (Reuters) – Bund futures rose in volatile trade on Thursday, consolidating recent losses before a sale of Italian debt as markets looked for fresh signs that policymakers were readying plans to tackle the euro zone’s debt problems.

European Commission President Jose Manuel Barroso outlined a broad plan to tackle the euro zone’s two-year debt crisis, fuelling the recent optimism that has seen a swift decline in safe-haven demand for German debt.

After falling for six consecutive sessions, the Bund future traded 31 ticks higher at 133.87. The contract could resume its downward path if European shares, which were volatile in early trade, turned positive and the Italian debt sale went well.

“It feels like the market seizes on anything even vaguely risk-asset positive at the moment and ignores anything that’s supportive,” a trader said.

Italy will sell up to 6.5 billion euros of BTP bonds across four separate maturities. Most notably, a reopening of the 2025 BTP marks the first sale since mid-July of a bond that falls outside the current scope of the European Central Bank’s bond-buying programmes.

“We suspect the tap (of the 2025 bond) is the response to high demand from market dealers. As such, the long paper should be easily absorbed,” said Annalisa Piazza, strategist at Newedge.

Italian 10-year bond yields built on a rise seen in the previous session to hit 5.792 percent as investors looked to eke out a concession in market prices.

NEW YORK/LONDON, Oct 12 (Reuters) – The U.S. Treasury sold $30 billion of 4-week bills at a high rate of 0.01 percent on Wednesday, marking the first time the rate has came in above zero in the last six such auctions.

Banks had essentially been giving the Treasury interest-free loans in the four-week maturity arena since late-August.

The last time a U.S. four-week bill auction had a rate above zero was a $30 billion sale on Aug. 30, with the high rate coming in then at 0.005 percent.

The Treasury holds the 4-week bill auctions on a weekly basis.

The yield may have been pushed marginally higher on Wednesday by the recent “risk-on” trade that has generally been pushing Treasuries yields higher since early October, said Tom Simons, money market economist with Jefferies & Co. in New York.

The Treasury’s selling of shorter-dated securities as part of the program dubbed Operation Twist — the $400 billion bond program intended to lower mortgage rates and other long-term borrowing costs — may also have put some minimal upward pressure on the 4-week bill rates, Simons said.

The Treasury on Thursday sold $8.87 billion of Treasuries maturing March 2013 through October 2013.

LONDON, Oct 12 (Reuters) – Low demand at the ECB’s first offer of long-term dollar funding since 2010 reflects the high cost of borrowing from the central bank and shows that whilst dollar funding remains scarce, most banks still have some market access.

Banks borrowed $1.4 billion at the first of three dollar liquidity offerings announced last month in a bid to stave off pressure in money markets caused by a growing reluctance to lend U.S. currency to euro zone banks.

The take-up was below the $5 billion predicted by a Reuters poll of money market traders, but in line with many analysts’ view that the 1.08 percent rate and steep collateral haircuts made the ECB funding expensive relative to market rates.

“It’s not surprising to see a small demand because the implied cost of obtaining that funding via the ECB is higher than the market,” said Morgan Stanley strategist Elaine Lin.

“It shows that there are only a limited number of banks that are not able to get any market access. Anybody who has access would rather use the market than the ECB.”

Six banks bid for the three-month loans and one bidder borrowed $500 million at the regular seven-day tender.

In September, U.S. money market funds’ reluctance to lend to euro zone banks because of exposures to troubled Greece grabbed investors’ attention, causing a spike in dollar funding costs and a sharp fall in banking shares.

LONDON, Oct 10 (Reuters) – Bund futures fell on Monday as the promise of a comprehensive solution to the euro zone’s debt crisis prompted some investors to switch back into riskier assets and opened the door for a larger selloff in low-risk German debt.

French and German leaders pledged on Sunday to unveil a multi-faceted plan by early November to address market concerns by providing a sustainable answer to Greece’s spiralling debt problems and recapitalising the region’s banks.

The relatively modest scale of the selloff reflected the worry that policymakers would deliver less than the sweeping solution promised, after previous attempts to halt the spreading crisis have proved insufficient.

“What we heard yesterday was quite important when taken at face value… investors are putting positions on what they expect to happen but they are conservative for now,” said Achilleas Georgolopoulos, strategist at Lloyds Bank in London

Nevertheless, the near-term outlook was likely to see bond yields rise, breaking out of the recent ranges and building pressure on those who had positioned for more risk aversion.

“I think for now the market will continue to trade on the back of this…. until the end of the month we will have repeated comments on the plan, and most of them will please the market,” Georgolopoulos said.

The selloff in German Bund futures extended to 134.54, down by as much as 87 ticks on the day, before settling at 134.62 while European stocks rose 1.6 percent.

LONDON, Oct 7 (Reuters) – Bund futures fell on Friday after forecast-beating U.S. jobs data though safe-haven bids could return next week if euro zone leaders fail to produce the plans for banking recapitalisations markets are anticipating.

The U.S. non-farm payrolls report, closely watched as a health-gauge for the U.S. economy, showed more jobs were added in September than expected and August’s figure was revised up.

“The initial reaction is due to slightly better than expected numbers and revisions to past numbers,” said Elisabeth Afseth, analyst at Evolution Securities in London.

“But … that doesn’t change the general picture that things are slowing and job creation is too slow.”

The Bund future fell after the data, testing support levels around 135, before paring losses to settle 47 ticks lower at 135.41.

The session low came at 135.08, above last week’s low of 135.01 — highlighted by technical analysts as a key support that would be a bearish trigger if broken on a sustained basis.

French and German leaders will meet on Sunday to discuss how to bolster euro zone banks weakened by the knock-on effect of the sovereign debt crisis, but the two states appeared split over the best way to raise funds.

LONDON, Oct 6 (Reuters) – Money markets began to price out the prospect of an imminent rate cut by the ECB after the bank’s tone on inflation showed little change on Thursday, confounding those who had expected a swift move towards lower rates.

The European Central Bank held interest rates steady at 1.5 percent at its October policy-setting meeting and gave few signals a cut could follow next month.

However, the central bank did seek to calm banking sector liquidity concerns with the introduction of new, long-term tenders to provide cash to troubled lenders.

With markets expecting an easing bias from the meeting, Euribor futures fell during ECB President Jean-Claude Trichet’s less dovish than expected statement.

The move implied a rise in the market’s central bank rate expectations, backed up by a rise in short-dated German bond yields and euro swap rates .

“There was some expectation of a rate cut, which didn’t come, or a relatively softer tone, but he hasn’t changed his tone, and we have the same message as in September,” said Achilleas Georgolopoulos, strategist at Lloyds Bank in London.

Euribor futures <0#FEI:> fell across the 2011/12 curve, with the December contract down 11 ticks on the day at 98.645 compared to 98.75 before the news conference.

LONDON, Oct 5 (Reuters) – Bund futures slid on Wednesday after signs that euro zone policymakers were gearing up to recapitalise the region’s banks prompted a rebound in battered banking stocks, but demand for German debt was unlikely to remain subdued for long.

European finance ministers agreed to safeguard banks, many of which could face heavy losses if a planned second bailout package for Greece does not go ahead, while France and Belgium agreed to bail out the debt crisis’ first banking casualty, Dexia .

Bund futures FGBLc1 fell by more than a full point to settle at 137.06, unwinding around a third of the sharp gains made in the previous three sessions. A rally in bank shares led European equities over 3 percent higher on the day.

“For the broader risk appetite it is positive that policymakers still seem to be willing to support their banks whatever the backdrop,” said WestLB strategist Michael Leister. “But … there is not too much relaxation in the market.”

Following the selloff in Bund futures, which traders said was driven by short-term investors booking profits on the week’s rally, more questions would need to be answered about where the money for recapitalisations would come from.

“I’m not convinced. This has been a baseless, hopeful risk-asset rally, and how many times have we been there?,” a trader said.

Peripheral euro zone bonds outperformed German debt on the day, with Italian and Spanish paper finding additional support from comments made by an IMF official saying the fund could invest in the countries’ debt.

LONDON, Oct 5 (Reuters) – Investors jumped on a sale of 4 billion euros in short-term German government debt on Wednesday, swallowing the lowest ever yields at an auction to take refuge from the woes of other euro zone markets.

Demand at the sale of two-year Schatz bonds was above-average while the yield fell 5 basis points from an equivalent auction last month to 0.46 percent, just below the previous record of 0.47 percent set last June.

Yields on German bonds, considered the safest in the euro zone, have reached record lows as policymakers’ response to the debt crisis looked increasingly inadequate and Greece’s access to vital aid funding remains in doubt.

“Even with the low rates, I think we are back in a risk-off environment so in that situation the market is not really looking at the level of yields, it just wants to have safety for the investment,” said ING rate strategist Alessandro Giansanti.

The bid-cover ratio at the sale — a measure of the strength of demand — was 1.9, exceeding both the level seen at September’s sale and the year’s average of 1.82. The Bundesbank retained an above-average 19.4 percent of the issue.

Last week, a sale of five-year German bonds drew bids worth less than the amount on offer as demand suffered against a backdrop of improved risk appetite with some anticipating new steps from euro zone leaders to address the debt crisis.

However German debt prices across the curve have closed back in on their highest levels this week as those hopes faded, and with signs that sovereign debt problems were beginning to hit banks.

LONDON, Oct 4 (Reuters) – Bund futures rallied strongly for a third straight session on Tuesday, driven higher as troubles at Franco-Belgian bank Dexia highlighted the acute risks posed by policymakers’ failure to tackle the euro zone debt crisis.

Belgian and French bonds underperformed German debt after concerns over Dexia’s heavy exposure to Greek debt and problems accessing wholesale funds prompted both states to pledge their support for the ailing lender.

Nervousness about a Greek default also supported a strong push towards the relative safety of German Bunds after European finance ministers pushed back the disbursement of crucial bailout funding until mid-November.

“We are in the midst of a serious negative feedback loop whereby we have intensifying concerns at the periphery which feed through into the banking sector,” said Richard McGuire, strategist at Rabobank in London.

“This also weigh on equities and limits extension of credit via the banking channels which limits growth and then feeds back into the peripheral crisis.”

Bund futures FGBLc1 settled at 138.24, up 80 ticks, having earlier reached a high of 138.80. A close above 138.10 would signal a rise back to the record high of 139.19 hit on Sept. 23 and then to 140.81, UBS technical analyst Richard Adcock said.

Adding to the uncertainty, euro zone finance ministers also said they were considering revisions to Greece’s bailout plan that would see private sector bondholders take bigger losses.

LONDON, Sept 30 (Reuters) – The European Central Bank is expected to take new steps next week to prevent the euro zone’s sovereign debt crisis causing a banking sector funding crunch but has limited scope to address the underlying barriers to interbank lending.

A quarter that began with a rate hike and banks’ reliance on ECB liquidity support near its lowest since mid-2009 looks set to end with calls for a steep rate cut and the likelihood that long-term emergency bank loans will be reintroduced.

The deterioration in banks’ willingness to lend to each other stems from the spread of the crisis to Italy and the growing prospect of institutions needing to take large losses on Greek debt holdings.

Without addressing those problems, any ECB action at next Thursday’s meeting was likely to prevent a freeze in interbank lending without stimulating a return to a better-functioning money market, analysts said.

“It’s more likely to just stabilise things and stop things getting worse rather than turn them around,” said Simon Smith, chief economist at FXPro in London.

“(The ECB) can deal with the liquidity side, but it doesn’t have the tools to deal with solvency problems — that’s more down to EU leaders, bank regulation and all the rest of it.”

Among the options at the ECB’s disposal is the reintroduction of 12-month loan tenders which would allow banks to borrow as much as they need, providing greater certainty over funding.