German bond yields edged higher on Tuesday ahead of sentiment data that will offer further clues about how investors are assessing an expected economic downturn in the bloc.
A Reuters poll expects data due at 0900 GMT to show the economic sentiment component of the survey remained unchanged from the previous month, albeit at a very negative value, in August.
“This comes after a week where bonds struggled to rally despite a steady drumbeat of bad economic headlines, begging the question of how much bad news is in the price already,” ING analysts told clients.
German 10-year yields ended last week 3 basis points higher despite an inflation data miss in the United States which suggested price pressures may finally be abating.
Prior to the data, by 0913 GMT, Germany’s 10-year yield, the benchmark for the bloc, was up 3 bps to 0.932%, holding below two-week highs of 1.025% touched last Friday.
Italian 10-year bond yields were down around 4 basis points at 3.02%. The closely watched gap over the German bond yield was at 209 bps.
Bond markets continue to face a tussle between fears around inflation and recession, which are particularly acute in the euro zone.
Weak data out of China and the United States and concerns around gas supply disruptions in Germany have hurt investor sentiment this week.
Also in focus was a debt auction from Germany, which is targeting 4 billion euros from the re-opening of a five-year bond.
