LONDON: Euro zone bond yields fell slightly on Tuesday before the release of region-wide business surveys that are expected to keep pressure on the European Central Bank to deliver more stimulus.
Purchasing managers' indexes across the euro zone are likely to confirm the euro zone's economic recovery is weak and unable to fuel inflation back to the ECB's target of close to 2 percent from near zero levels.
Speaking to the economic and monetary affairs committee of the European Parliament on Monday, ECB President Mario Draghi said the central bank was ready to use additional unconventional tools, closely monitoring risks to inflation.
Earlier this month, Draghi announced a plan to buy asset-backed securities and covered bonds, but markets are increasingly speculating that he will be forced to start buying government bonds, a programme known as quantitative easing (QE).
"Disappointing euro area PMIs should underpin QE speculation today as inflation expectations continue to slide," Commerzbank rate strategist Michael Leister said in a note.
German 10-year Bund yields, the benchmark for euro zone borrowing costs, fell 1 basis point to 1.01 percent.
Yields on lower-rated euro zone bonds were flat in early European trade.
Weak data is expected to push them lower despite the fact that countries such as Italy and Spain need a significant pick-up in growth and inflation to stabilise their debt.
Investors buy the bonds anticipating the ECB will eventually enter the market and sweep a large chunk of them out. Spanish 10-year yields were flat at 2.22 percent, while Italian yields stood at 2.39 percent - both keeping close to their record lows.
"We have PMIs today. Peripheral yields should continue to fall," one trader said.
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