Euro zone bond yields pinned near lows with ECB eyed
While a rally in low-rated debt that pushed yields in Spain, Italy and Portugal to record lows on Monday eased, investors remained focused on the ECB's meeting on Thursday.
"D-day is drawing near," said ING strategist Martin van Vliet, expecting more details on the breakdown and procedure of asset purchases due to commence this month.
In an otherwise light data schedule on Tuesday, uxexpectedly-strong German retail sales provided further evidence that growth is picking up in the bloc's largest economy. This gave a boost to stock markets, while safer fixed-income assets flatlined.
German 10-year yields -- the euro zone benchmark -- were up 1 basis point at 0.37 percent, but not far from a low of 0.28 pct hit last week.
Italian and Spanish equivalents were flat at 1.35 and 1.29 percent respectively, just above troughs of 1.30 and 1.23 percent touched on Monday.
"The market is very much in a wait-and-see mode," said Rainer Guntermann, a strategist at Commerzbank.
The exception is Greece, where a precarious financial situation has seen its borrowing costs rise well above its euro zone peers over the last months.
Greek 10-year yields were a touch lower on Tuesday at 9.81 percent, but with shorter-dated yields even higher, there are still signs investors fear the country could once again default.
Despite a four-month extension to its existing bailout it negotiated with the euro zone last month, Greece still faces a steep decline in revenues and could run out of cash by the end of March.
Spain's economy minister said on Monday that euro zone countries were discussing a third bailout for Greece worth 30 billion to 50 billion euros, but EU officials said there were no such talks.
Ratings agency Fitch warned on Tuesday that Greece could face further downgrades if it does not secure a "durable" aid agreement with the rest of the euro zone.
A survey of mainly Germany-based investors showed the chance of Greece leaving the euro zone in the next 12 months had risen to its highest level since late 2012, even after Europe extended Athens's financial lifeline.
"The new aid programme for the country does not seem to be convincing, rather a 'Grexit' is now bound to be a constant topic among investors for the months to come," said Sebastian Wanke, an analyst at sentix, the consultancy firm which conducted the survey.
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