Euro zone bond increases, Greek bonds firm after opens bond sale

Greek bonds were firm on Tuesday after the country opened books on its first 10-year government bond sale in a decade, while elsewhere other eurozone bond yields edged higher ahead of key data and after China revised downwards its growth expectations. Greece announced the 10-year syndicated bond sale on Monday, cashing in on a rally that followed Moody's upgrade of the country by two-notches to B1 on Friday.

Leads BNP Paribas, Citi, Credit Suisse, Goldman Sachs, HSBC and JP Morgan announced price guidance in the 4.125 per cent area. Greek 10-year government bond yields have fallen by around 75 basis points since January, touching their lowest level since 2006 on Monday, allowing the Greek Treasury to lock in funding at attractive levels.

Mizuho rate strategists say fair value for the new deal is around 3.81 per cent but expect final pricing to offer around a 20 basis point premium to this level. Austria also plans to sell a combined 1.5 billion euros of February 2029 and February 2047 paper.

Elsewhere, government bond yields in the bloc were around a basis point higher ahead of key data releases in Europe and the U.S. and after China revised down its GDP growth target to 6.0-6.5 per cent versus a 2018 goal of around 6.5 per cent. The Italian services PMI is expected to fall further amid slowing domestic demand, adding to a weak reading of the manufacturing PMI last week.

Spain's services sector slowed slightly in February but activity beat expectations as new orders rebounded, a survey showed on Tuesday. Spanish 10-year government bond yields were largely unchanged at 1.187 per cent. Istat will also release the final estimate of Italian GDP for the fourth quarter of 2018, which is not expected to change the reading that the country's economy was in technical recession in the second half of last year.

In the U.S., ISM non-manufacturing data will offer a read across to Friday's non-farm payrolls data and is expected to show an improvement on January's data which came during the U.S. government shutdown. "ISM is expected to rebound, with the reason it fell [in January] attributed to sentiment at the time," said Peter Chatwell, rates strategist at Mizuho. "There has been a rebound in other soft data, which should also be reflected."

German 10-year government bonds, the benchmark for the region, rose one basis point in early trade to 0.169 per cent. (Reporting by Virginia Furness; Editing by Kirsten Donovan)

(With inputs from agencies.)