LONDON: Euro zone government bond yields on Tuesday came off lows hit in the previous session ahead of the release of investor sentiment indicators that could provide further clues on the economic and monetary path for the bloc.
Bond yields have been pushed lower in recent weeks by faltering inflation expectations and a potential trade war. A sharp selloff in technology stocks overnight, led by Facebook , also added pressure before attention shifted to sentiment indicators.
The ZEW investor survey of economic sentiment was due at 1000 GMT followed by the euro zone consumer confidence flash indicator for March due at 1500 GMT.
"Sentiment indicators in general appear to be at a crucial phase after the PMIs were a bit lower than expected for two consecutive months," said Commerzbank strategist Christoph Rieger.
"The direction for the euro zone economy is still good but it's a slight change in momentum, and markets always want to stay one step ahead."
Long-term inflation expectations in the single currency bloc are at their lowest since November at 1.67 percent, reflecting this change in sentiment.
Yields were 1-2 basis points higher across the single currency bloc ahead of the release of the economic sentiment indicators, but they are still a shade away from some of the lowest levels seen in months.
The yield on Germany's 10-year government bond, the benchmark for the region, was up 1.5 basis points at 0.58 percent; not far from a near two-month low of 0.56 percent hit last week and well below a high of 0.81 percent reached earlier this year.
Shares in Facebook fell almost 7 percent overnight, weighing on stock markets globally and pushing US and European borrowing costs lower as investors retreated to the safety of developed economy government bonds.
With investors already worried about the potential impact of American tariffs on European business and with inflation continuing to prove elusive in the bloc, yields are close to multi-month lows and well below the year's highs.
"It's a very risk-off environment with trade tensions and stories that Trump might announce tariffs at any moment. Against that backdrop when you have a single story around Facebook, it becomes a trigger to drive equities lower and keep bond yields somewhat compressed," said ING strategist Benjamin Schroeder.
UK inflation numbers were also due out on Tuesday, which could give some indication on how the Bank of England will view future policy.
Across the pond, the US Federal Reserve's two-day monetary policy meeting is due to end on Wednesday with a rate hike largely expected and priced in to the market.
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