LONDON: German Bunds fell on Tuesday, tracking fresh losses in US Treasuries overnight due to renewed bets that the Federal Reserve could trim its bond purchases earlier than previously expected.
A thin calendar for top-tier economic data leaves the market focus firmly on speeches from Fed officials Dennis Lockhart and Narayana Kocherlakota for hints on when the central bank might start rolling back its monetary stimulus.
Minds are still firmly on the fallout of better than expected jobs data on Friday and Bunds were also weighed down by a firmer tone in riskier assets such as equities, wiping away gains triggered by the European Central Bank's surprise interest rate cut last week.
The Bund future was last 28 ticks down at 140.73 with German 10-year yields up 2.4 basis points at 1.78 percent. US 10-year yields were up 3.5 bps at 2.78 percent in European trading, resuming their rise after a Veterans' Day holiday on Monday.
"Treasuries are trading heavily, that's where we are taking the lead at the moment although we still think it should be reasonably supported by the ECB tone last week," a trader said.
"We are looking for European outperformance on a cross market basis although if (10-year) Treasury (yields) get dragged to the 3 percent level Bunds aren't going in the opposite direction."
A sustained break by the benchmark US yield above 2.75 percent, a level some in the market said was providing important resistance, could herald a move towards 3 percent, the highest since early September.
A Reuters poll on Friday after the October jobs report showed economists at several primary dealers thought the Fed would cut its bond purchases as soon as January.
Just two weeks ago, a similar poll found the majority backing the central bank to hold off until next March.
Lockhart and Kocherlakota are the first Fed officials to speak since the strong payrolls print.
"It will be interesting to see whether they indicate more of a shift towards QE tapering starting in December or in January," said Mathias van der Jeugt, a strategist at KBC in Brussels.
Other euro zone bonds were also slightly weaker.
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