LONDON: German government bonds were steady in early trade on Monday after posting stellar returns in 2011 but with Asian, British and US markets closed for New Year holidays trading volumes were extremely thin.
Policymakers marked the 10th anniversary on Sunday of the introduction of euro notes and coins by urging governments in the currency bloc to save and consolidate to overcome their debt crisis.
The next few months will be critical for the euro zone and Bunds may remain well bid and possibly test new highs, but they may not see another year as good as 2011 for some time.
German paper returned almost 10 percent across the curve last year and longer-dated paper almost 20 percent , according to the Markit iBoxx indexes.
"We expect a brief consolidation in the 10-year area of the curve after year-end buying has supported Bunds over recent sessions," said Commerzbank rate strategist David Schnautz.
"A test of the 2 percent-handle should fail over coming days, though, as the inaugural 2012 bond issuance activities by Spain and Italy should come in focus soon."
March Bund futures were 2 ticks higher at 139.07, having quickly retreated from an opening high of 139.32. Benchmark 10-year yields were 1.5 basis points lower at 1.828 percent.
Rating agency Standard & Poor's is expected to decide in January whether to downgrade the 15 euro zone countries, including Germany and France, it has on creditwatch negative.
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