Bunds jump as Summers drops Fed candidacy

Reuters

LONDON (Reuters) - German Bunds rose on Monday after Lawrence Summers, widely seen by financial markets as less committed to ultra-loose monetary policy, withdrew from the race to head the U.S. Federal Reserve.

Bunds tracked U.S. Treasuries higher as investors bet the Fed would now take a more gradual approach to tightening policy than it would have under Summers.

The other leading candidate, Fed deputy chief Janet Yellen, is seen by markets as likely to more supportive of the central bank's existing policy and less likely to scale bond purchases back quicker.

Summers' decision comes just days before the Fed meets on Tuesday and Wednesday to decide when and by how much to trim its asset purchases from the current pace of $85 billion a month.

"Yellen presumably is now the favourite and that will set the tone. She has always been viewed as a far more dovish choice so that's the focus," a trader said.

The Bund future was last 49 ticks up at 138.48 compared with 137.99 at Friday's settlement.

(Reporting by Emelia Sithole-Matarise; editing by Patrick Graham)

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