LONDON: German Bunds held steady on Tuesday, with expectations the European Central Bank may ease policy offsetting selling pressure from a pick-up in the US labour market.
ECB President Mario Draghi departed from a prepared speech on Monday to reiterate that the central bank was ready to do more, after cutting interest rates last week, to support the ailing euro zone economy.
Bets policy would be eased further helped stabilise Bund futures that tumbled by about a point on Friday after above-forecast US jobs data dented appetite for low-risk assets.
Bund futures were 2 ticks lower on the day at 146.14, having hit a record high of 147.20 on Thursday, but traders and analysts said gains were likely in the near term.
"We are watching data, but I think expectations for more easing from the ECB should keep (Bunds) underpinned. Draghi was dovish yesterday," one trader said.
Looking at momentum indicators on the charts, UBS technical strategist Richard Adcock said "there is no evidence of any bearish reversal patterns developing, suggesting weakness is still viewed as corrective and an unwinding of upside extremes."
He saw Monday's 145.97 low and the April 24 low at 145.62 as near-term support, with first resistance at the 147.20 high.
Yields on lower-rated euro zone bonds edged down as central bank policies pushed investors towards higher-yielding assets. Italian 10-year yields were 5 basis points lower on the day at 3.83 percent, while equivalent Spanish yields were 3 bps lower at 4.09 percent.
Portugal's October 2023 benchmark was flat, yielding 5.52 percent after Lisbon mandated six banks to help launch a 2024 bond and take advantage of the improved sentiment.
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