Bonds: Poor factory data, Fed speak bolster Gilts

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

US: 2.11% (-7bp)

UK: 1.75% (-3bp)

Germany: 0.53% (-1bp)

France: 0.92% (-0bp)

Italy: 1.61% (+3bp)

Spain: 1.83% (+3bp)

Greece: 8.51% (+0bp)

Japan: 0.22% (-1bp)

Portugal: 2.68% (+4bp)

Gilts continued to push higher despite renewed weakness in the pound following a much weaker than expected reading on the country's factory output.

UK industrial output shrank 0.7% month-on-month in November versus economists' calls for a flat outturn.

"We continue to believe the UK industrial production remains a cause for concern as a structural lack of competitiveness remains, itself magnified by a strong currency, which although has depreciated since mid-November is still historically strong, and government policies (fiscal consolidation and the EU referendum)," Andrzej Szczepania and Francois Cabau from Barclays said in a research report sent to clients.

"Although the recent fall in the pound should provide some support to exporters, it is difficult to find many other reasons for optimism around the manufacturing sector," chimed in Martin Beck, senior economic advisor to the EY ITEM Club.

It was a light day in terms of fresh data on the other side of the Pond, leading investors in US Treasuries to take their cue from the latest Fed speakers and another sharp drop in energy quotes.

Speaking overnight, the president of the US Federal Reserve bank of Atlanta, Dennis Lockhart, told investors there may not be enough "fresh data" in January or march to support another interest rate hike.

"How much will we know about inflation trends or inflation developments going into the mid-March meeting? We will have some data but not a great deal more," Lockhart told reporters after a speech in Atlanta.

In a somewhat more aggressive tone, his opposite number at the Dallas Fed, Robert Kaplan, said enough new data might not be available when Fed rate-setters meet again in January.

However, "between now and March I think there will be," he said.

Yields diverge across the Eurozone

Spanish yields at the long-end of the curve were bolstered by a syndicated sale of debt via banks.

Madrid got off €9bn in 10-year bonds, attracting what some market commentary termed a respectable cover of three.

Spain was set to come back to the market on Thursday with as much as another €5bn in government debt with maturities as far out as 2023.

Austria, France, Germany and the Netherlands also held auctions on Tuesday.

Rome was set to come to market the next day.

To take note of, European Central Bank Governing Council member Francois Villeroy De Galhau reportedly said inflation remains too low and policy-makers have the tools to act further should it become necessary needed.

Acting as a backdrop, global risk-appetite was more or less stable on Tuesday following repeated interventions by authorities in Beijing to deter speculation against the yuan, sending the country's currency as much as 0.7% higher against the US dollar in Hong Kong trading.