German bunds nearly flat in subdued trade; 10-year auction in focus

The German bunds traded nearly flat Tuesday as investor remain focused on the upcoming 10-year bond auction, which is schedule to take place on Wednesday by 09:35 GMT.

The yield on the benchmark 10-year bond, which moves inversely to its price, hovered around -0.095 percent mark, the yield on long-term 30-year note remained steady at 0.48 percent and the yield on short-term 2-year bond stood flat at -0.684 percent by 06:30 GMT.

The 10-year German yield has climbed to the top of its -0.16 percent to -0.10 percent range on Monday as banking-sector-related risk aversion eased. The 10-year T-note/Bund yield spread has remained in the low 170s, where it has been for a week or so, but has at the same time been on a widening track since July that should take it back to last autumn's highs of 175/178 basis points over the coming weeks.

Deutsche Bank AG shares slid to a record in the U.S. as Bloomberg News reported that some hedge funds have reduced their exposure to the company. Fellow German lender Commerzbank AG said last Thursday that it would cut one in five of its employees and suspend dividend payments, which increased market tensions.

Lastly, investors remained keen to focus on the series of upcoming economic data, highlighted by PPI,service PMI, retail sales and industrail production.

Meanwhile, the German stock index DAX likely to begin the day modestly lower. Index closed 1.01 percent higher at 10,511.02 on Friday.