German Bunds flat before Fed minutes, debt sale
By Marius Zaharia LONDON, Aug 21 (Reuters) - German bond yields were little changed on Wednesday, with the market trading in narrow ranges before the release of minutes of the Federal Reserve's July meeting. The minutes will be perused for hints on the timing and scale of cuts in U.S. monetary stimulus, uncertainty over which has generated volatility across financial markets. After rising to their highest since March 2012 on Monday as markets increasingly bet the Fed's would move as early as next month, German 10-year yields retreated on Tuesday. The same expectations have caused outflows in emerging markets, with some of the money eventually finding its way back into German debt. On Wednesday, markets were calmer, with Bund futures rising 7 ticks to 140.67, versus 2013 lows of 139.71 hit on Monday. Ahead of an auction of two-year German debt that analysts said was likely to go well, ten-year Bund yields were flat at 1.84 percent, off Monday's highs of 1.924 percent. Analysts said that, with yields close to 2013 highs, markets were positioned for the Fed minutes to show a scaling back of stimulus was imminent. "We do not expect much new guidance from the minutes so the risk is that we see a bit lower yields in U.S. Treasuries and Bunds," said DZ Bank strategist Christian Lenk. He said any rise in yields if minutes do offer a more clear guidance was likely to be limited by the safe-haven appeal of Bunds, which was enhanced by the sell-off in emerging markets. Indian, Indonesian and other markets tumbled on Tuesday in anticipation of reduced Fed asset purchases. "If the turmoil continues and we see signs central banks there are forced to raise rates that will be a factor weighing on global growth and...(setting) a natural boundary for U.S. and German rates," Rabobank market economist Elwin de Groot said. Germany will sell up to 5 billion euros of new two-year bonds later in the day, with analysts saying a recent rise in yields was likely to lure investors. "The absolute yield close to the highest levels since June offers interesting switch opportunities out of the surrounding (bonds on the German curve)," Commerzbank strategists said in a morning note. The European Central Bank's promise to keep interest rates at record lows for a long time could also support demand. Two-year Bund yields were flat at 0.21 percent.