LONDON: Bund futures were steady on Wednesday as investors refrained from putting on big bets before a German debt auction this session and the European Central Bank's policy meeting on Thursday.
Germany will kick off the week's issuance with a 4 billion euro sale of five-year bonds later. Analysts say the auction will attract demand, despite the low yields on offer, because the bond is considered attractive on a relative basis.
"It will go absolutely fine (given that) there are switches that clients can do whether they are bullish or bearish," said Robert Crossley, interest rate strategist at Citi.
"The auction offers a good opportunity to temporarily shorten duration for a minimal yield give-up or alternatively, if you think the rally continues, as we probably do, then clients can pick up yields by extending into the auction bonds," he said, adding that both switches "look attractive".
The yield on the five-year bond to be sold was little changed on the day at 0.34 percent.
German Bund futures were also broadly steady at 145.19. Richard Adcock, technical analyst at UBS said that while he did not rule out further weakness over the short-term it would be a "corrective" move in a bullish trend.
Commerzbank also expected healthy demand for short-dated German debt one day before the European Central Bank may take a more cautious tone on the economy, after recent data painted a gloomy picture of the region's growth prospects.
"We look for decent demand with markets eyeing a softer ECB this week and see value against (surrounding bonds)," the bank said in a research note.
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