Euro zone debt stable as investors brace for German Ifo

LONDON, Sept 24 Tue Sep 24, 2013 3:42am EDT

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LONDON, Sept 24 (Reuters) - Euro zone government bonds were stable on Tuesday, with investors looking to German business sentiment data for insight into the euro zone's economic outlook.

Comments from central bank officials on balance gave European bonds support on Monday. European Central Bank President Mario Draghi flagged the possibility of another round of cheap loans to banks even as latest business surveys gave a more upbeat picture than expected on growth.

Investors had expected the Federal Reserve's decision last week to keep its bond-buying program intact to have taken some of the pressure for more accommodative rate policy off the ECB.

"The Ifo will be the most important item today. We see risks for a weaker-than-expected outcome as we are already at very high levels for the Ifo," said Mathias Van der Jeugt, rate strategist KBC.

"Yesterday we saw a dovish Draghi, who mentioned for the first time also the potential use of another LTRO... we also had rather dovish talk from Fed governors."

German Bund futures were 2 ticks higher at 138.80 but were stuck in a tight 19-tick range. Ten-year German yields were flat at 1.86 percent.

Ten-year Italian bond yields were little changed at 4.26 percent and the Spanish equivalent was were steady at 4.28 percent.

Draghi said on Monday the ECB is ready to offer banks more long-term loans to keep money-market interest rates from rising to levels which could push inflation too low.

One influential Fed policymaker said on Monday it must for now continue to push hard against threats to the U.S. recovery, but should still be able to reduce its support for the economy later this year.

"Central bank talk was supportive yesterday, I suppose there is plenty more of central bank talk today so we will see if they continue in the same theme," one trader said.

Fed Bank of Cleveland President Sandra Pianalto and Fed Bank of Kansas City President Esther George are among central bank officials due to speak this session.

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