There are fears that increased demand from banks for government bonds to meet new liquidity buffer requirements and to back derivatives trades will drain markets of liquidity.

"My sense is that cash markets have not seen liquidity impacted negatively so far, but there is a general concern about the future. That is a concern we probably share," the head of the UK Debt Management Office, Robert Stheeman, told a conference in London.

(Reporting by Ana Nicolaci da Costa and Huw Jones, editing by David Milliken)