Bunds stick to ranges before central bank meetings, data, supply

LONDON: German Bund futures edged up in thin trade on Monday, but investors refrained from placing big bets before a series of monetary policy decisions and data this week.

The European Central Bank, Bank of England and Federal Reserve are expected to offer reassurances that their monetary policies will remain loose at meetings this week.

Michael Leister, senior interest rate strategist at Commerzbank, said the market was "fairly neutral" going into the central bank meetings and that Bund futures would probably trade in a 142-143 range until then.

"At least for the ECB, there is not too much expectation, but they showed us last time around that they are good for a surprise," he said. "For the Fed, (it is) really difficult to say, there seems to be the consensus that they will start tapering in September which we think might be a bit too early."

German Bund futures rose 16 ticks to 142.64, having fallen last week after four straight weeks of gains. Ten-year German yields were 1.2 basis points lower at 1.65 percent and two-year yields were flat at 0.15 percent.

Trading was expected to be choppy because liquidity was thinned by the summer holidays in Europe.

With many economists and investors betting on a reduction of the Fed's asset-buying program in September, the accompanying statement will be scrutinised for clues on the timing of a potential tapering, which will likely remain data-dependent.

"The only thing which markets are a bit confused about is the Fed's communication policy," Piet Lammens, strategist at KBC said, highlighting a Wall Street Journal report last week that the Fed may debate changing its forward guidance to underline the message that it will keep rates low for a long time to come.

"If I had to make a bet for this week, I would say that yields would cautiously go somewhat lower but nothing much to get excited about."

Investors will also scour US growth, manufacturing and jobs data this week to gauge how the Fed may proceed.

Ten-year Italian government bond yields were 2.1 basis points higher at 4.43 percent, with debt prices slightly under pressure as investors made room for supply on Tuesday.

The Spanish equivalent was flat at 4.59 percent.