LONDON: German government bond futures inched up at Wednesday's open but may come under some selling pressure before a sale of a new 10-year bond later in the day.
Despite expectations the European Central Bank will flesh out details of its proposed bond buying programme at its policy meeting on Thursday, demand for lower-risk bonds has been strong this week at Belgian and Austrian auctions, while Bunds have been trading in a tight range.
"Bunds might come under a bit of pressure ahead of the auction but at the end of the day we're waiting for tomorrow," a trader said.
"The market seems to be expecting a massive solution, the swing in sentiment does seem to have gone too far that way."
German Bund futures were 10 ticks higher at 143.60.
Germany will sell 5 billion euros of the new September 2022 paper, which carries a record-low coupon of 1.5 percent.
However, analysts had mixed views on how the auction would go, although noting the bond was trading at a fair value, or even slightly cheaply, in the grey market.
"This week's heavy long-end supply from core-issuers as well as the looming ECB meeting could weigh on the auction," Commerzbank strategists said in a note.
"Against this backdrop, the take-down of the new Bund will thus largely be a function of the prevailing risk-sentiment in the run-up to the auction."
The launch of Germany's last 10-year benchmark in April failed to attract enough bids to cover the amount on offer - the only time that has happened this year.
The Netherlands will also sell a three-year dollar denominated bond, coming to market at short notice to take advantage of the good demand for core bonds.
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