Trading remained relatively contained compared to Monday, when German bond yields rose as much as 5 basis points, with no major data releases due on Tuesday and attention turning to the European Central Bank meeting on Thursday.
Investors hope the meeting will give more clarity about the ECB’s stimulus plans once the bloc’s economic recovery takes hold.
Germany’s 10-year yield, the benchmark for the region, rose above Monday’s peak to a new high since early February at -0.215% at the session open, but dipped below that level and was last up 1 basis point at -0.23% at 0724 GMT.
Other euro area 10-year yields rose similarly.
“As the calendar remains light while the flow backdrop looks set to improve significantly in coming days, we do not yet expect (euro zone government bond) yields to sustain levels above this year’s highs and suggest buying into further Bund weakness,” Christoph Rieger, head of rates and credit research at Commerzbank told clients.
Bond prices fall as yields rise.
Net cash flows -- the money investors have left from the payments they receive from coupons and maturing bonds relative to the amount of new issuance in the market -- are around 12 billion euros this week and nearly 15 billion euros next week, according to Danske Bank.
Focus is also on ECB bond-buying, after its pandemic emergency bond purchases slowed last week, according to Monday’s data.
Data due later on Tuesday will show how much the ECB bought last week before redemptions, which can hold down the net purchase number.
The ECB increased the purchase of its emergency bond purchases at its March meeting, but analysts broadly say that they are yet to see a significant pick-up in bond buys.
Analysts at UniCredit said average weekly purchases since the March meeting are around 16.8 billion euros, below the 17.8 billion euro weekly average since PEPP was launched last year.
In the primary market, the European Union is selling a 15-year bond via a syndicate of banks that will raise 4.75 billion euros to refinance debt backing EFSM bailout loans, according to a lead manager memo seen by Reuters. In auctions, Germany will raise 5 billion euros from a three-year bond and Finland is seeking 1 billion euros from the re-opening of a 20-year bond. (Reporting by Yoruk Bahceli, Editing by William Maclean)