LONDON Feb 19 (Reuters) - Bund futures edged up on Tuesday with demand for low-risk debt propped up by concerns over the possibility of an inconclusive outcome to Italian elections this weekend, though gains were capped before German sentiment data.
Market focus will be on the German ZEW index of investor and analyst sentiment for signs of recovery in the euro zone's biggest economy after it shrank more than expected in the fourth quarter.
The index due at 1000 GMT is seen rising for the third straight month to 35.0 in February from 31.5 last month, according to the consensus forecast in a Reuters poll of 36 economists.
"People are trying to downplay the weak (GDP) data, that it has been a bit backward-looking and since then things have improved. But I don't know if we quite buy into that," a trader said.
"We think the market is cheap ... (Going) into the Italian election at the weekend and the LTRO repayment (by banks of the ECB's three-year loans) on Friday we're playing for the long side," he added.
The Bund future was last seven ticks up at 142.83 compared with 142.76 at Monday's settlement.