June 20, 2013 / 6:13 AM / 4 years ago

EURO GOVT-Bunds plunge after Fed signals less bond buying

LONDON, June 20 (Reuters) - German Bund futures fell to their lowest since February on Thursday after the Federal Reserve signalled it was ready to reduce its bond purchases if its economic predictions came true.

Fed Chairman Ben Bernanke said the U.S. economy was growing fast enough to allow the central bank to trim its $85 billion monthly stimulus, with the goal of ending it in mid-2014.

At 0607 GMT, Bund futures were 130 ticks lower on the day at 142.14, having hit their lowest since February at 141.95 just after the session opened. Italian BTP futures were 114 ticks lower at 111.16.

German debt often moves in the same direction as U.S. Treasuries due to the two assets’ safe-haven status. Ten-year U.S. T-note yields hit 15-month highs of about 2.38 percent overnight.

“They (the Fed) were a lot more hawkish than expected,” one trader said.

Spain plans to sell 3-4 billion euros of 2018, 2021 and 2023 bonds later in the day, while France plans to issue 7.5-9.0 billion euros of fixed rate and inflation-linked paper.

“We have a massive amount of stuff coming out of Europe and it’s going to be difficult because risk assets seem to be hurt just as much as core assets. It’s going to be a hard day, very volatile,” the trader said.

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