LONDON: German government bonds fell on Tuesday as better-than-expected US data and corporate earnings along with talk Spain may be close to a bailout and of Greece receiving more aid increased appetite for riskier assets.
Spanish and Italian debt prices were slightly stronger. The moves were not expected to extend beyond recent ranges, though, with uncertainty over Spain and Greece still high.
"We've been in a risk-positive mood. We've had positive data ... yesterday out of the US on retail sales, positive earnings results from (US bank) Citigroup, reduced concerns of a Greek exit," Rabobank senior fixed income strategist Richard McGuire said.
"But the moves have been limited because there is still so much uncertainty. We have yet to see any indication that Spain is ready and willing to request a bailout. I don't think they are ready at this stage. Market pressure is key."
A Spanish aid request would activate European Central Bank bond purchases. The bond-buying programme is seen as a significant step towards easing the debt problems of the euro zone's weaker member states.
McGuire also said a recent improvement in US data, such as Monday's September retail sales, was "by no means definitive" in terms of signalling a sustainable improvement in the global outlook.
Bund futures were 19 ticks lower at 141.36, comfortably within this month's range of roughly 141-142. Cash 10-year German yields rose 1.8 basis points to 1.491 percent.
Traders said the ranges were likely to hold until more clarity emerged on Spain and Greece.
A Spanish bailout request could come next month, according to euro zone officials, one of whom said talks on a potential aid programme were advancing.
Greek Prime Minister Antonis Samaras said on Monday he was confident he could conclude talks with the troika of international lenders soon and secure the next aid tranche needed to keep the country afloat and in the euro zone.
German Chancellor Angela Merkel ruled out on Monday letting Greece default on its debt, echoing comments made by Finance Minister Wolfgang Schaeuble over the weekend.
"There's more talk about Spain being close to a bailout, there's more speculation on Greece," one trader said. "But in terms of activity it's been calm for quite a few days and I don't see why that's going to change."
Greek 10-year yields fell 1.7 bps to 17.50 percent, having dropped as low as 17.388 percent on Monday, levels last seen before the country's debt restructuring in March.
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