LONDON - Germany's benchmark 10-year bond yield hovered near three-week lows on Tuesday, while southern European debt yields kept record lows in sight ahead of inflation numbers expected to reinforce the case for more stimulus at next week's European Central Bank (ECB) meeting.
Having risen in early November as news of a COVID-19 vaccine boosted hopes of recovery next year, government bond yields have drifted back down as global central bank officials have indicated stimulus will remain in place for some time.
Germany's Bund yield, which has held a narrow range in recent days, was a touch lower in early trade at -0.58%, close to Monday's three-week low of -0.60%.
"Bond markets are likely to remain in wait-and-see mode ahead of the ECB and Fed meetings," analysts at UniCredit said in a note, referring to the U.S. Federal Reserve also.
The ECB is scheduled to meet next Thursday while the Federal Reserve meets later this month.
Monthly flash data from European Union (EU) statistics body Eurostat, due at 1000 GMT, is expected to show that consumer prices in the euro area fell 0.2% year-on-year in November after a 0.3% decline the previous month.
German annual consumer prices fell further in November, pushed down by a VAT cut introduced as part of the government's stimulus push to help Europe's largest economy recover from the coronavirus shock, data showed on Monday.
The weak inflation outlook is one reason why the ECB is expected to deliver more stimulus next week.
Elsewhere, southern European bond yields were a touch lower on the day - hovering near recent record lows.
Italy's 10-year bond yield was down 1 basis point on the day at 0.57%.
In a report released late on Monday, Moody's Investors Service said that most sovereigns face a "significant negative shock" from the pandemic and that recent developments in vaccine trials have not changed the rating agency's forecasts.
(Reporting by Dhara Ranasinghe; Editing by Andrew Cawthorne) ((Dhara.Ranasinghe@thomsonreuters.com; +442075422684;))