Bonds: Investors wait on US Fed amid rebound in oil futures

These were the movements in some of the most widely-followed sovereign bond yields:

US: 2.01% (+0bp)

UK: 1.69% (+1bp)

Germany: 0.45% (-3bp)

Spain: 1.64% (-7bp)

France: 0.75% (-3bp)

Italy: 1.51% (-5bp)

Spain: 1.64% (-7bp)

Greece: 9.70% (+26bp)

Japan: 0.22% (-1bp)

Ten-year Gilts and US Treasury notes were little changed on Tuesday as a bounce higher in crude oil futures offset another fall in Chinese equities overnight.

Remarks from Iraq´s oil minister, Adel Abdel Mahdi, that Russia and Saudi Arabia were showing signs of flexibility about curbing the glut of oil which was weighing on international oil markets triggered buying in 'black gold', helping to buoy market sentiment.

"We have seen some flexibility from the brothers in Saudi and a change in tone from Russia," he said.

Acting as a backdrop, investors were also waiting on Wednesday evening´s policy statement from the US Federal Reserve.

The Fed was not expected to modify its stance much but speculation that it would do so at its next meeting, or beforehand, was rife, especially with financial markets having largely priced out another rate hike by the time of the March meeting of the Federal Open Market Committee.

"We don’t think so. We think the Fed will want to wait for more data to assess the impact of recent market weakness and slowing EM growth on the domestic economy. [...] Ultimately, we think the Fed will struggle to complete four hikes this year.

"The Fed’s dot-implied hiking path faces growing external and domestic headwinds as rising political risk – voting begins in the US party primaries next week - adds to plummeting oil prices [...] a pause in the planned hiking path will cause investors to further question the Fed’s credibility, triggering a further sell off in US credit markets reminiscent of the reaction to last September’s no hike decision," RBS´s Alberto Gallo said in a research note sent to clients.

A sale of $55bn in four-week US Treasury bills met with strong demand, with the bid-to-cover ratio on the sale coming in at 3.69 versus 3.09 the last time around.

Later in the day, an auction of $26bn in two-year debt also saw a higher bid-to-cover amid a large increase in participation by indirect bidders, from 3.7.5% at the last sale to 57.9% - the most since June 2009.

Spain managed to get off €2.55bn in three and nine-month T-bills despite the political uncertainty in the country, more than the €2.5bn expected.

A gauge of US consumer confidence, courtesy of the Conference Board, improved from a reading of 96.3 in December to 98.1 for January (consensus: 96.5).