German bond yields rose on Tuesday ahead of sentiment data that will provide further clues about how investors view an expected economic slowdown in the bloc.
A Reuters poll expects the data, due at 0900 GMT, to show that the economic sentiment component in August was unchanged from the previous month, albeit at a very negative reading.
“This comes after a week in which bonds struggled to rally despite a continuous drumbeat of bad economic headlines, raising questions about how much bad news is already priced in,” analysts at ING told clients.
Germany’s 10-year bond yield ended last week 3 basis points higher despite a lack of U.S. inflation data that suggested price pressures may finally ease.
The yield on Germany’s 10-year bond, the benchmark for the bloc, rose 3 bp before the data until 09:13 GMT. to 0.932%, holding below the two-week high of 1.025% touched last Friday.
The yield on Italian 10-year bonds fell about 4 basis points to 3.02%. The closely watched German bond yield gap amounted to 209 bps.
Bond markets continue to be torn between inflation and recession fears, which are particularly acute in the Eurozone.
Weak data from China and the United States and concerns over gas disruptions to Germany hurt investor sentiment this week.
Also in the spotlight was the debt auction from Germany, which is targeting €4 billion from the reopening of the five-year bond.
