LONDON: German Bund futures lingered around their lowest levels in six weeks on Wednesday as investors betting on more monetary stimulus from the US central bank preferred riskier, higher-yielding assets.
The Federal Reserve concludes a two-day policy meeting later and the market has high expectations that it may extend its bond-buying programme dubbed "Operation Twist". The programme aims to push down long-term borrowing costs by selling short-term securities to buy longer-term ones.
At 0607 GMT, Bund futures were 1 tick lower on the day at 141.35, having hit their lowest level in six weeks on Monday at 141.14. They remained well below record highs of 146.89.
"People are looking for some sort of extension of the Operation Twist, that seems to be the consensus," one trader said.
Ten-year cash yields were 0.5 basis points higher at 1.538 percent. Credit Agricole strategists said the 1.50 percent level stimulates demand and exposes yields to a sharp fall if US monetary easing hopes prove to be misplaced.
Spain may face more selling pressure in bond markets ahead of sales of 2014, 2015 and 2017 bonds on Thursday. Madrid paid the highest average cost since the launch of the euro to sell 12-month paper on Tuesday, with the higher yields helping lure investors.
Germany will sell up to 5 billion euros of two-year bonds later on Wednesday, with the auction expected to find sufficient demand following a small rise in yields in recent days. German two-year bonds yielded 0.094 percent after starting the month in negative territory.
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