Germany's two-year bond sale next week is expected to attract a broad range of investors seeking safety amid the euro debt storm even though yields are well below the rate of inflation.
Total supply in the euro zone next week could reach 8 billion euros ($10.4 billion), with Germany selling up to 5 billion euros of Schatz bonds expiring in March 2014 and Italy offering inflation-linked debt.
Near-term risks surrounding a new Greek rescue package a longer-term need to park a surfeit of banking sector cash in safe and liquid assets mean the auction is unlikely to struggle to find bidders.
"Obviously most demand is coming from the really conservative accounts, institutional investors, central banks, every institution that wants to park money for the time being," said Michael Leister, rate strategist at DZ Bank in Frankfurt.
Investors, particularly of a conservative bent, will be keen to buy up short-term German bonds for their safe-haven status and high liquidity, despite the fact they carry a yield of just 0.25 percent in the secondary market.
"If you think of what the enemies of a bond investor are - higher interest rates and higher inflation rates - they're largely absent at the moment," said Nick Gartside, international chief investment officer at J.P. Morgan Asset Management.
"Then, you couple the fact that investors want a bit of an insurance policy for some of the big risks out there, then you can see why these government bonds are well supported." German inflation was running at an annual rate of 2.3 percent in January according to the EU measure, but fell 0.5 percent on the month.
Foreign exchange reserve managers who need to diversify their holdings would rather put their money in Germany than other countries in the euro zone, said Marc Ostwald, strategist at Monument Securities in London.
"Now that the opportunities which appeared to be there in December and January in Italy and Spain have crunched all the spreads right ... I don't think anyone, particularly in this environment, is going to be in any great hurry (to invest there)," he said.
Analysts said banks would also likely pick up some of the paper at Wednesday's auction because short-term German paper offers liquidity for their balance sheets.
Italy is expected to sell zero-coupon and inflation-linked bonds next Friday. There was speculation that the Tesoro could cancel the linker auction if a Greek bailout deal did not pass off smoothly as expected next week, causing investors to shun riskier assets.
However, markets have cautiously priced in a smooth outcome in Greece and, given the Italian Treasury's past commitment to persevere with selling inflation-linked debt, analysts were optimistic the sale would go ahead.