Bonds: Yields drift to and fro ahead of risk events, Greek debt hit

These were the movements in some of the most widely-followed 10-year sovereign bond yields:

US: 2.44% (+3bp)

UK: 1.29% (+4bp)
Germany: 0.33% (+1bp)
France: 1.02% (-3bp)
Italy: 2.23% (-5bp)
Spain: 1.66% (-4bp)
Greece: 7.52% (+13bp)
Portugal: 4.01% (-11bp)
Japan: 0.09% (+0bp)

Gilts were the laggard in the market as investors bided their time ahead of the January CPI release and a speech from US Federal Reserve chair Janet Yellen both of which were scheduled for the next day.

Nevertheless, Greece was very much present on traders' minds although on Monday at least sharp losses on the Mediterranean country's two-year debt did not appear to have any discernible impact on that of other euro area periphery issuers at the 10-year tenor.

"The pound has been one of the few currencies to compete with the US dollars strength today, ahead of inflation data due tomorrow which is expected to come in close to the Bank of England’s 2% target. A strong number here would legitimise the concerns expressed by MPC member Kristin Forbes in comments last week, about too hot inflation, and start to peel away the fragile consensus on the MPC committee," said Michael Hewson, chief market analyst at CMC Markets UK.

The data from ONS were expected to show headline UK consumer prices accelerating from a 1.5% year-on-year pace in December to 1.9% in January.

In parallel, at the so-called 'core' level the rate of CPI inflation was seen edging higher from 1.6% to 1.7%.

As for Ms Yellen, she was scheduled to deliver her testimony on the state of the economy to the US Senate Banking Committee on Tuesday, at 1500 GMT.

Yields on the benchmark two-year Greek government bond jumped 77 basis points to finish the session at 9.22% on the heels of a warning from its own central bank on the risks involved in delays on reaching a deal with Athens's creditors.

In remarks on Monday, Greek central bank chief Yannis Stournaras told lawmakers: "Any further delay in completion [of a deal with the European Commission and IMF] beyond this month will feed a new circle of uncertainty.”

"Such a vicious cycle could return the economy to recession and a rerun of the negative developments that took place in the first half of 2015," Stournaras said.

The IMF and the executive arm of the EU were divided on whether Greece required further debt relief in order to stabilise its debt, with Germany and the Netherlands also insisting the IMF had to participate in any further financing under Athens's third bail-out programme.