LONDON: German Bund futures fell on Tuesday after forecast-beating German and France growth data, easing concerns that the euro zone's two biggest economies were sliding into recession with the bloc's ailing periphery.
Seasonally-adjusted data showed gross domestic product grew 0.3 percent in the second quarters on the back of solid exports and consumption. Earlier, figures showed French GDP was static in the second quarter confounding expectations of a contraction.
Low-risk Bunds retreated after the figures but losses were capped by apprehension that wider euro zone growth numbers due at 0900 GMT would still show the currency bloc slid back into recession, led by its struggling peripheral states.
"Maybe the fears were GDP was going to be worse but the German and the French numbers coming above forecast have soothed those fears so Bunds are falling," a trader said.
"But I can't see (Bunds) moving far down. We still have (German sentiment) ZEW coming up. I don't think people are willing to take a big position in anything."
Bund futures were last down 32 ticks at 142.86 with German 10-year yields 2.8 basis points higher at 1.43 percent , in the middle of the 1.126-1.6 percent range they have been hemmed in since early July.
Traders and strategists saw little scope for them to break out of that range before September, when the European Central Bank is expected to give details about its plan to intervene in markets to contain Spain and Italy's borrowing costs.
ECB QUESTIONS
Spanish and Italian yields inched higher as some investors worried about the conditions that needed to be met before the ECB could start buying bonds.
The ECB signalled a week ago it could start buying short-dated Spain and Italy's debt but only if troubled countries were willing to formally ask for aid from the euro zone's EFSF/ESM rescue funds and accept some degree of fiscal supervision, something that Spain has so far resisted.
Investors are also keen for detail on how much and which maturity the ECB would target.
"We still want to know how much is the ECB willing to provide even without the country specifically asking for aid. How are they going to do it?," said Elisabeth Afseth, a strategist at Investec.
"If that appears to be fairly generous, that the amount they are willing to buy is substantial, it might again push front yields lower and allow Spain to get a couple of auctions through and delay the need to request a full bailout."
Spanish two-year yields were 3 bps up at 4.3 percent though they remain almost a point down from euro-era peaks reached on Aug. 25 before ECB President Mario Draghi pledged the ECB would do whatever it took to preserve the euro. Equivalent Italian yields were up 4 bps at 3.58 percent. Longer-dated Spanish and Italian yields nudged up.
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