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French bonds pare

losses at close

PARIS: French bond futures settled lower but off their lows on Tuesday while Pibor futures strengthened.

Bond futures pared early losses after Bundesbnank President Hans Tietmeyer was reported to have said the German Central Bank would continue to look for possibilities to cut rates further. He said in an interview in German daily Die Welt that there was no reason at present to raise rates.

Pibor was stronger all day on hopes the Bank of France will cut rates on Thursday. Analysts polled by Reuters predicted the Bank would cut rates by 10 basis points after its next Monetary Policy Council meeting.

The French market greeted calmly the auction of France's first variable rate government bond. Eighteen billion francs of the TEC10 index-linked bond were sold.

The government also sold 17 billion francs of 13-week T-bills at an average yield of 3.93 percent, down from last week's 3.96 percent. It announced the sale of 400 to 600 million Ecus of BTANs and OATs on Thursday.

The OAT-to-bund spread narrowed to 14 basis points from 19 at Thursday's close.

French markets were closed from Thursday until Tuesday for the Easter weekend holiday.

Other than a Bank of France rate cut, French bond markets will be eyeing Thursday's U.S. data on producer and consumer prices for direction.

After the two consecutive rises in payrolls in March and February, U.S. markets no longer expect an early Federal Reserve interest rate cut. Were U.S. prices to show signs of rising sharply, the markets could react negatively.

Until the data are released, French analysts do not expect bond futures to move very much, they said.-Reuter