Waiting for ECB and Fed, euro zone bond markets stick to familiar ground

Euro zone government bond yields were mostly steady on Tuesday, refusing to budge from recent ranges before this week's European Central Bank and Federal Reserve meetings. With the next round of U.S. tariffs against Chinese goods scheduled to take effect on Dec. 15 and Britain holding a national election on Thursday, investors appeared to be sticking to the safety of fixed income for now.

In early trade, most 10-year bond yields across the euro zone were largely flat. Germany's benchmark Bund yield was steady at -0.30% , below a recent high of -0.26%. Italian 10-year bond yields, which fell on Monday, dipped 2.5 basis points to 1.36% .

The Fed concludes a two-day meeting on Wednesday, with Friday's booming U.S. jobs report expected to give the U.S. central bank all it needs to stick to its plan not to cut interest rates further in the near future. In the euro zone, Christine Lagarde holds her first meeting and news conference as ECB chief on Thursday.

"Expectations for policy action from the ECB and Fed are subdued," said Commerzbank rates strategist Rainer Guntermann. "Lagarde's communication style will be watched closely, but that's unlikely to lead to any repricing in bond markets." Deutsche Bank economists have just raised their forecast for euro area growth from 0.8% to 1.0% next year.

"This is the first upgrade in over a year and is broadly equalling trend growth," Deutsche Bank strategist Jim Reid said in a note. "It reflects leading indicators brightening slightly and risks reducing." Elsewhere, Japan's 10-year bond yield briefly touched 0% for the first time since March.

A $122 billion stimulus package approved by Japan's cabinet last week has put some upward pressure on Japanese yields.