* Bunds come under selling pressure
* Could outperform Treasuries near-term -analyst
By Ana Nicolaci da Costa and Marius Zaharia
LONDON, June 18 German Bunds fell on Tuesday on
speculation the U.S. Federal Reserve will signal it is edging
closer to trimming its bond purchases after a two-day monetary
Economists expect Fed Chairman Ben Bernanke to repeat on
Wednesday his recent comment that the purchases could be trimmed
at one of the next few meetings, if the U.S. economy continues
"Most of what we are seeing today is pre-positioning for the
big (Fed) meeting tomorrow," David Keeble, global head of fixed
income strategy at Credit Agricole said.
"I think the consensus is that he will put the idea of a
taper in the market quite firmly but that he will try to
mitigate the volatility by emphasising that everything is
contingent on everything else."
Bund futures were 57 ticks lower at 143.21.
Concerns over when the Fed may begin unwinding its
ultra-loose monetary policy has recently taken a toll on both
stock and government bond markets and made them particularly
sensitive to data from the world's largest economy.
A release earlier on Tuesday showed U.S. consumer prices
rose in May but by less than expected.
"Bernanke will probably try to continue to prepare the
market for tapering off quantitative easing," DZ Bank strategist
Christian Lenk said.
"On the other hand, given the recent rise in yields, he
would also be careful not to panic the market."
A Reuters poll showed most economists believe the Fed will
reduce its purchases by the end of 2013. A significant number
expect the U.S. central banks to curb its purchases as early as
Lower-rated bonds, which have also recently seen selling
pressure amid doubts over future central bank stimulus, were
Ten-year Spanish government bond yields were
1.8 basis points lower at 4.57 percent and the Italian
equivalent 4 basis points higher at 4.31 percent.
"I saw the Spanish domestic buying Spain and selling Italy,"
one trader said.
BUNDS VS TREASURIES
While the price falls in Treasuries have weighed on Bunds
recently - with the two assets usually moving in the same
direction as both are low-risk - analysts see potential for
Bunds to outperform in the near term.
"If you look at Europe, there's uncertainty that there will
even be a recovery later this year," Rabobank market economist
Elwin de Groot said.
"The ECB will continue to use the verbal intervention weapon
to contain money market rates," he said, adding that he saw
potential for a 10-20 basis points widening in the yield spread
between 10-year German and U.S. debt in the next three months.
European Central Bank President Mario Draghi reiterated on
Tuesday the bank was "ready to act" if needed to aid the euro
The U.S./German 10-year yield spread
was last 62 basis points.