LONDON, July 16 (Reuters) - German Bund futures rose on Monday, building on the previous week's gains as the euro zone's debt crisis continues to support flows into the region's top-rated, highly liquid bonds, with technical signals pointing to fresh gains.
German debt remains the investment of choice for those seeking shelter as yields rise on bonds issued by Spain and Italy, both battling to retain market confidence that they can keep financing their debts while reining in deficits.
Bund futures rose 12 ticks to 144.84, with trading expected to remain light and price action choppy throughout the day. Last week, total traded volume in the Bund future was its lowest since early May as activity slowed down over the summer.
Last week Italy's credit rating was downgraded by two notches on fears over the liquidity of its debt market and in expectation that aleady-weak economic conditions would worsen.
"Spanish and Italian speculation remains at the fore. To me sentiment still feels fragile... we're just waiting for the next development there," a trader said.
Technical analysis also pointed to a continued rise in the price of German debt futures.
"There is no evidence of any bearish reversal patterns forming and the risk remains skewed to the upside," said UBS technical analyst Richard Adcock.
"A break above the 145.16 high will be the next bullish trigger, opening the door back to the 145.52 June 1st extreme and potentially further over the longer term."