LONDON: German government bonds inched up early on Tuesday, supported by comments from Federal Reserve Chairman Ben Bernanke which kept alive hopes for further purchases of US bonds, underpinning the Treasury market.
Equities were set to follow Wall Street and Asia higher and US Treasuries were steady after Bernanke said a continuation of accommodative monetary policies was needed to support more rapid economic expansion.
June Bund futures were 12 ticks higher at 136.86, with 10-year yields 2 basis points lower at 1.93 percent.
Bunds remained broadly supported by fears that the euro zone debt crisis could escalate again with concerns now focussed on Spain's ability to meet tough budget targets.
"Bernanke's supportive for everything and Bunds are trading okay," a trader said.
"Spain may be the next problem, I think everyone would like to have a proper look at their books."
Because of that, benchmark German yields are not expected to rise too much although a new trading range just above 2 percent - a level that's proved hard to break sustainably this year - is a possibility.
European Union finance ministers meet on Friday and are expected to discuss how to create a firewall big enough to protect Spain and Italy should the debt crisis flare back up.
Italy sells 6-month T-bills ahead of an auction of medium- and longer-term bonds on Thursday.
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