Bonds: Move in European spreads likely

The collapse in the euro to new life-time lows in recent weeks has hurt the whole of the euro-zone government yield curve. Early September saw the yield on the benchmark two-year German Bunds fall to 5.25%. Yields were under pressure from the European Central Bank's hike in borrowing rates, the issue of e5bn of two-year notes by the Bundesbank and by continuing worries over the sliding value of the currency.

With the euro still under pressure, many funds are positioned for a further rise in

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