Bunds lower on post-Fed, data profit-taking

German Bunds opened lower on Thursday as investors booked profits after a rally the previous session on the back of dismal US housing data and a cautious tone on the economy from the US Federal reserve.

The Fed renewed its promise to hold benchmark interest rates exceptionally low for an extended period, as expected, but also said financial conditions had become less supportive of growth, helping underpin bonds' recent strength [ID:nN22150078].

European equities <.FTEU3> were set to open higher, also adding to pressure on Bunds.

At 0604 GMT, September Bund futures <FGBLU0> were 20 ticks lower at 128.42. Two-year bond yields <DE2YT=TWEB> were half a basis point higher at 0.6 percent, with 10-year yields up 1.5 basis points at 2.660 percent <DE10YT=TWEB>.

But traders said German Bunds should remain supported.

"The periphery remains under immense pressure, especially Greece with the month-end index related selling," said a trader. "That, and the tone from the FOMC should keep core markets underpinned." The 10-year Greek/German government bond yield spread has widened sharply this week because of expected forced selling at the end of the month by passive indexed funds after Moody's became the second rating agency to downgrade Greece to junk earlier this month.

In supply, Italy will issue up to 1.5 billion euros of index linked BTPs.