* Bund futures ease as equities rally
* Bunds still within sight of 2-month highs hit last week
* Fed outlook underpins demand for both equities and bonds
* Italian yields edge up as 9 bln euros of debt sales eyed
By Emelia Sithole-Matarise
LONDON, Oct 28 (Reuters) - German Bund futures slipped on Monday as solid earnings lifted stocks but losses were tempered by expectations the Federal Reserve will maintain the size of its bond purchases at a policy meeting this week.
Bunds hit two-month highs last week after below-forecast German sentiment and euro zone manufacturing and service sector surveys raised concern about the bloc’s recovery.
Focus this week is on the Fed’s two-day meeting starting on Tuesday. Analysts widely expected the Fed will not begin trimming its bond purchases until early next year to lessen the economic impact of a two-week government shutdown.
U.S. economic reports this week, delayed by the shutdown, are expected to support the view that the Fed needs to maintain stimulus to support a recovery that has slowed in recent weeks.
This has helped both safe-haven bonds and riskier assets such as shares. Europe and Asian stocks rose on Monday.
“Bunds have ticked down a little bit after Asian equity markets ticked higher but they still look pretty well underpinned,” said Nick Stamenkovic, a strategist at RIA Capital Markets.
“Any strong data this week will be shrugged off by the market and any data that’s weak will reinforce the market view that the Fed is not going to taper until next year.”
The Bund future was 6 ticks lower at 141.00, off a two-month peak of 141.22 hit last week, while German 10-year yields were 0.7 basis points up at 1.76 percent.
Among lower-rated euro zone bonds, Italian 10-year yields were 1.1 bps up at 4.23 percent before sales this week of 9 billon euros of conventional and inflation-linked debt. Equivalent Spanish yields were flat at 4.15 percent.