LONDON, Sept 27 (Reuters) – Bunds extended falls on Tuesday as riskier assets continued their recent recovery on the view that euro zone policymakers were preparing decisive action to tackle the bloc’s debt crisis, though the risk of a swift reversal remained high.

Bund futures FGBLc1 dropped by over a full point to a session low of 135.95 — the lowest since Sept. 16.

This came after large losses on Monday with officials now seen to be considering plans to boost the size of the euro zone’s rescue fund to enable it to halt the spread of market pressure to Italy and Spain.

“If this was implemented it would be a great step towards the addressing of the situation, so this is positively read by markets,” said Patrick Jacq, strategist at BNP Paribas.

The move into riskier assets was also supported by talk that the European Central Bank could extend its liquidity provision to include one-year loans and possibly re-enact its covered bond purchase programme.

European stocks rose sharply and Bunds remained under pressure despite Spanish minister Elena Salgado denying plans to extend the region’s EFSF bailout fund to 2 trillion euros. The European Commission also said formal talks had not yet started on ways to enlarge the fund.

With no firm proposals on the table, and any significant changes to the European Financial Stability Facility subject to a lengthy approval process by member states, the appetite for safe-haven Bunds could return, market participants said.

LONDON, Sept 27 (Reuters) – Bunds extended falls on Tuesday as riskier assets continued their recent recovery on hopes that euro zone policymakers were readying decisive action to tackle the bloc’s debt crisis, though the risk of a swift reversal remained high.

Bund futures FGBLc1 dropped by a full point to 136.27 – their lowest since Sept. 16. This came after large losses on Monday with officials now seen to be considering plans to boost the size of the euro zone’s rescue fund to enable it to draw a line under the spread of market pressure to Italy and Spain.

“If this was implemented it would be a great step towards the addressing of the situation, so this is positively read by markets,” said Patrick Jacq, strategist at BNP Paribas.

The move into riskier assets was also supported by talk that the European Central Bank could extend its liquidity provision to include one-year loans and possibly re-enact its covered bond purchase programme.

European stocks opened sharply higher and the euro edged up versus the dollar .

But with no firm proposals on the table, and any significant changes to the European Financial Stability Facility subject to a lengthy approval process by member states, the appetite for safe-haven Bunds could return.

“There seems to be a bit more noise on plans ahead, but whether they get it through or not is another matter… It’s a classic post-big EU conference rally, but the question is ‘has it got legs beyond two or three days?’,” said a trader.

LONDON, Sept 23 (Reuters) – The near-term outlook for Bunds hinges on whether policymakers will take new steps to tackle the euro zone debt crisis, with the scramble for safety set to push yields to fresh record lows next week unless the weekend brings new developments.

Growing belief among market participants that Greece will eventually default on its debts, and continued speculation over the health of the region’s banks has seen investors turn their backs on riskier assets in favour of Bunds.

In a volatile session, Bund futures FGBLc1 traded in line with cross asset swings in risk sentiment. The contract set record highs at 139.19 before falling to settle at 138.12 as stocks recovered losses and bond investors booked profits.

“With everything up in the air at the moment, no one really knows where to be positioned into the weekend,” said a trader.

“One minute it sounds like the G20 are going to do something and the next you’re thinking ‘no chance’. It’s a mess.”

Markets are looking for international policymakers to follow up supportive pledges with decisive action to contain the fallout of Greece’s troubles and stop flashpoints building in the banking sector and larger economies of Italy and Spain.

Group of 20 leaders pledged to maintain financial stability and Greek officials played down media reports the country was preparing for an orderly default but markets remained biased towards safe-haven assets.

LONDON, Sept 22 (Reuters) – Safe-haven demand drove German yields to record lows on Thursday as the U.S. Federal Reserve’s gloomy economic outlook hit riskier assets and its new plans to reduce long-term borrowing rates helped flatten the yield curve.

On the U.S. economy, the Fed statement said there were “significant downside risks” prompting a renewed flight towards less risky assets and out of equities.

“The Fed outlook has really spooked equity markets and that’s all feeding through into Bunds,” a trader said.

Bund futures FGBLc1 rallied to hit a session high of 138.75, within a whisker of the 138.91 contract high, while European equities fell sharply.

Traders said weak euro zone composite Purchasing Managers’ Index data, showing the first contraction in two years, added to the flight to quality.

As anticipated, the Fed unveiled plans to sell short-term Treasury holdings and buy longer-dated bonds — a move dubbed “Operation Twist” — in an effort to push the cost of borrowing lower and bolster the country’s housing sector.

The scale of the $400 billion maturity extension programme surprised some in the market and saw the U.S. Treasury curve flatten sharply.

LONDON, Sept 20 (Reuters) – A restructuring of Greek debt should not trigger a payout on CDS contracts in the near term, nor should Athens’ inability to pay state workers next month, says an official of the body that would decide whether a ‘credit event’ had occurred.

“CDS looks at obligations defined effectively as debt obligations — bonds and loans,” David Geen, General Counsel at the International Swaps and Derivatives Association (ISDA), said on Tuesday in an interview for Reuters Insider television.

“If their bonds and their loans are still current, even if they stop paying salaries for teachers and policemen, that is obviously a very unfortunate situation, but it doesn’t trigger CDS.”

The ISDA’s determination committee would have the final say on whether a credit default swap triggering ‘credit event’ had occurred.

Greece’s ability to pay state salaries and pensions next month hangs in the balance. It says it will run out of cash if it fails to convince international lenders it will implement necessary austerity measures to secure the next payment of its bailout funding .

The price of default insurance contracts suggests investors see the probability of a Greek default at more than 90 percent, according to Reuters calculations on data provided by Markit.

Greece has no bond repayments to make until December but faces some small interest bills over the coming months.

LONDON, Sept 19 (Reuters) – Bund futures rose on Monday, driven higher by uncertainty as Greece’s access to bailout funding hung in the balance and by disappointment at policymakers’ latest failure to agree new measures to tackle the euro zone debt crisis.

Finance ministers meeting in Poland broke no new ground over how to ease the crisis and while Greece pledged further austerity measure would be forthcoming, no concrete steps were announced.

“There was some expectation that the EU might announce some sort of new policy to stabilise peripheral markets and ease some of the tensions but they did absolutely nothing,” said Nick Stamenkovic, strategist at RIA Capital Markets.

Bund futures FGBLc1 were last at 137.33, up 68 ticks on the day while 10-year bond yields fell 5.6 basis points to 1.808 percent.

EU and IMF inspectors will hold a conference call with Finance Minister Evangelos Venizelos beginning at 1200 GMT to hear how Greece plans to plug this year’s budget shortfall.

The talks will be key with Greece set to run out of cash in October unless it can convince officials to release the next 8 billion euro tranche of bailout funding.

“The more you read, the more doubts there are about whether this Greece payment is going to go through — the ramifications of that are pretty serious,” a trader said.

LONDON, Sept 16 (Reuters) – Coordinated action to provide longer-term dollar funding should stall the rising pressure on euro zone banks and may prompt a small improvement in interbank lending conditions, analysts said on Friday.

Major central banks around the world said on Thursday they would cooperate to offer banks access to three-month dollar loans — removing a key source of money markets stress built over recent weeks.

Nevertheless, the move was not seen solving the banking sector’s core problems — chiefly their ability to absorb losses stemming from the euro zone sovereign debt crisis.

The European Central Bank currently offers seven-day dollar liquidity each week and the first three-month operation for euro zone banks will take place in October.

By materially reducing the risk of a funding squeeze leading to bank failures, the move to extend liquidity support could encourage some to resume dollar interbank lending.

“When things like this get put in place it often takes away some of the requirement for them because people are more likely to lend (money) themselves,” said Gary Jenkins, head of fixed income at Evolution Securities.

“They think ‘Why let the central bank make the money? If they’re there as a backstop and there is liquidity, I feel more comfortable lending it myself’.”

LONDON, Sept 15 (Reuters) – Bund futures edged lower on Thursday as euro zone leaders showed signs of their determination to see out Greece’s debt problems without it leaving the single currency, prompting some to trim positions in safe-haven bonds.

German and French leaders said after a conference call with Greek Prime Minister George Papandreou on Wednesday that they were determined to keep Greece in the euro.

There was no clear sign from them that a stalemate over Athens next bailout payment had been broken but officials in Greece and Germany were optimistic that EU and IMF inspectors would now take a positive view of latest Greek austerity efforts.

“We have had some constructive comments from politicians… this has offered markets some support, so we are in a process of stabilisation in a wide range as volatility remains high and stress remains very elevated,” said Patrick Jacq, strategist at BNP Paribas in Paris.

Bund futures FGBLc1 were 20 ticks lower at 136.67, continuing to fall back from recent record highs after shedding more than three-quarters of a point on Wednesday.

“I still don’t think anything has changed underneath, but in these markets pullbacks can be quite aggressive and so we might see more pressure today on a combination of supply and risk-on feeling,” the trader said.

Technical charts showed support for the contract at 136.52, the 38 percent retracement of the September recovery, and the expectation was for further price strength while this level remained intact, said UBS technical analyst Richard Adcock. The contract has tested this support three times in the last week.

LONDON, Sept 14 (Reuters) – German Bunds fell on Wednesday as signs that officials were working on proposals for a common euro zone bond prompted some investors to move back towards risky assets, though the day’s losses represented only a fraction of recent gains.

European Commission President Jose Manuel Barroso said the commission would soon present options for the introduction of common euro zone bonds, though he warned that the measures would not put an end to the crisis.

Bund futures shed FGBLc1 86 ticks to settle at 136.87, falling from a record high of 138.91 set earlier this week.

However, the prospect of a common issuance programme – touted by some as the only long term answer to the region’s debt problems — remains a distant one.

“Euro bonds are only realistic at one minute to midnight before the whole system collapses,” said Gary Jenkins, head of fixed income at Evolution Securities.

“They may be the quick and easy solution but the politicians, based on voter feedback, have very little interest.”

Analysts also pointed to a German court ruling which has made it all but impossible for Germany to sign up to such an initiative.

LONDON, Sept 13 (Reuters) – Funding through interbank markets remained scarce and expensive for euro zone banks on Tuesday as concerns about a Greek default and rising pressure on Italian bonds increased the focus on heavily exposed French institutions.

The cost of insuring senior French bank debt against default rose according to data from Markit, while a media article suggesting BNP Paribas had no access to dollar funding was cited by equity and currency market participants.

Money market traders said that while access to dollar loans remained difficult for French banks — under close scrutiny owing to their large holdings of peripheral government bonds – the situation was not one of rapid deterioration.

“The stress levels have always been there and they’re certainly not getting any less… but there’s no sense of panic from the banks as they can fund themselves through central bank cash,” a trader said.

Fiscal slippages have threatened to cut off Greek aid, raising the prospect of a default by year end, while a weak Italian debt auction showed investors remain reluctant to buy new debt from the heavily-indebted state.

The cost of dollar funding, measured by three-month Libor interbank rates , edged higher to 0.34711 percent and access to dollars via cross currency basis markets was close to its most expensive levels since late 2008 at -111 basis points.

One head of money markets at a bank active in interbank lending said it had not lent to French banks in any currency since December over concerns about exposure to Italian and Spanish debt.