July 2, 2012 / 6:11 AM / 5 years ago

EURO GOVT-German Bunds pause after sell-off

LONDON, July 2 (Reuters) - German government bonds nudged higher at Monday's open, pausing from Friday's sharp sell-off after euro zone leaders surprised markets by agreeing measures to stabilise bond markets.

Markets may struggle for direction in the early part of the week with investors hungry for details on the measures and ahead of Thursday's European Central Bank policy meeting and Friday's U.S. employment report.

Under pressure from Spain and Italy, euro zone leaders agreed on Friday to let their rescue fund inject aid directly into stricken banks from next year and intervene on bond markets to support troubled members, moves that helped yields on the two countries' bonds ease.

"They delivered more than expected last week and markets did the right thing on Friday, although it was very quiet," said a trader.

"But it wasn't a game changer, the periphery may stabilise heading into the ECB meeting but that's probably about the best you'll see."

September Bund futures were 15 ticks higher at 141.05, with 10-year yields little changed at 1.589 percent.

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