July 1 (Reuters) – German Bund futures opened higher on Thursday with weak Chinese data adding to global growth fears and euro zone sovereign debt worries in focus after rating agency Moody’s placed Spain’s Aaa rating on review for a cut. Signs that economic growth in China was slowing saw U.S. government debt rally and equities fall sharply in Asian trading as investors sought out safe-haven assets.
“The weak Chinese PMIs have weighed on Asian stocks… risk assets are going to be under pressure early on,” said a trader in London.
At 0610 GMT, the Bund future FGBLc1 was 19 ticks higher at 129.57. The 10-year German bond yield DE10YT=TWEB was at 2.557 percent, down 2.5 basis points while the two-year Schatz yield DE2YT=TWEB was flat at 0.607 percent.
Moody’s Investors Service said late on Wednesday that it may cut Spain’s triple-A local and foreign currency government bond ratings after a three-month review. Ratings agency Fitch cut Spain’s triple-A credit rating to AA-plus in late May.
Spain will issue up to 3.5 billion euros of bonds later in the session.
“Today’s auction of the SPGB 3 percent April 15 may well turn out as a very important yardstick regarding how comfortable the investor community is with the outlook for Spain,” said Commerzbank analysts in a note.
The 10-year Spanish bond yield spread over German bunds had narrowed in the previous session after a lower-than-expected take up of European Central bank funds had soothed some worries over banks’ reliance on ECB funding.
Emergency 12-month loans worth 442 billion euros will be repaid to the ECB, while the central bank will offer banks a further opportunity to borrow funds at a six-day tender later in the session.
The result of the six-day tender will give a clearer picture of the excess liquidity within the euro system after money market rates rose in anticipation of a liquidity squeeze after Wednesday’s low borrowing.
The EONIA overnight unsecured lending rate EONIA= jumped to 0.542 percent at its daily fixing, up from 0.325 percent on Tuesday. (Reporting by William James)