LONDON: German bond yields held steady on Tuesday before a survey expected to show more settled German investor and analyst morale in November after it plunged to its lowest in almost two years last month.
The monthly ZEW survey is forecast to have edged back into positive territory after falling below zero last month, but this is unlikely to change market bets on further European Central Bank easing.
On Monday a Bundesbank survey showed business confidence among German companies is declining, with only one in three now expecting production to increase next year and one in four anticipating a rise in exports.
"We are looking for a stagnant reading (of the ZEW) rather than a clear direction either way. Even the consensus is for a very modest rebound," said Marius Daheim, chief strategist for global interest rates at Bayerische Landesbank.
"That would at least argue for the Bund market to remain supported at current levels rather than be weighed down by the data."
The market remained supported by comments from ECB President Mario Draghi that further policy measures could include sovereign bond purchases, he said.
German 10-year yields, the benchmark for euro zone borrowing costs, were unchanged on the day at 0.79 percent.
Rabobank strategists, who expect the ECB to announce it would start buying government bonds at the end of the first quarter of 2015, forecast Bund yields to hit 0.65 percent in the first three months of next year.
"However, on the Bund front intermittent sell-offs seem likely as talk of QE ramps up. Meanwhile, narrower peripheral (spreads) seem more certain," they said in a note.
Yields on lower-rated bonds were also flat to a touch lower after outperforming Bunds on Monday in the wake of Draghi's comments.
Peripheral euro zone bond issuers, especially Italy and Spain, stand to benefit most from any government bond purchases by the ECB.
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