July 25, 2012 / 6:24 AM / 5 years ago

EURO GOVT-Bund futures edge up as Spain worries dominate

LONDON, July 25 (Reuters) - German Bund futures edged up on Wednesday as concerns about Spain supported flows into safe-haven debt despite worries about the potential damage the euro zone crisis will do to even its strongest economies.

Moody's cut the credit outlooks of AAA-rated Germany, the Netherlands and Luxembourg to negative earlier this week, citing the risk that Greece may leave the euro and the potential cost of shoring up large economies like Spain or Italy.

At 0610 GMT, Bund futures traded 14 ticks higher at 145.17.

"I think they (Bunds) are fine, we're not getting any good news out of the periphery," one trader said.

Spain is increasingly expected to have to seek a full bailout on top of the already agreed rescue of its banks, as its borrowing costs have settled above levels deemed as sustainable.

Madrid paid the second highest yield on short-term debt since the birth of the euro at an auction of three- and six-month bills on Tuesday.

Even though Bunds remain near record highs, they have underperformed other safe havens this week. On Tuesday, the spreads between German 10-year bonds and their U.S. and UK counterparts narrowed by some 10 basis points to 16 and 23 bps, respectively.

Germany sells up to 3 billion euros of 30-year bonds later in the day.

"Get that out of the way and the Bunds can rally again," one trader said. (Reporting by Marius Zaharia; Editing by John Stonestreet)

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