Safe-haven German Bund futures edged lower at Wednesday's open though the view among investors that Greece will struggle to implement the tough austerity required under its latest bailout was set to limit losses.
The Bund future edged down to 137.74, 22 ticks lower on the day, as the dust begins to settle on the 130 billion euro bailout agreed on Tuesday.
Improved risk appetite on the back of the deal has quickly given way to fresh doubts over whether Greece will make the agreed budget cuts, and whether the steps will be enough to make its huge debt sustainable.
"The general view is that this isn't the deal to end all deals. When's the next one?,» a trader said, adding Bunds were likely to remain bound by the 137 to 140 range that has held since the start of the year.
He added that the lack of positive momentum meant this year's rally seen in Spanish and Italian debt was unlikely to extend further, with investors questioning whether there was much value left in peripheral bonds.
Ten-year German yields were 1.2 basis points higher at 1.992 percent, while the two-year yield was 1 bps higher at 0.272 percent ahead of the launch of a new benchmark bond at around 1030 GMT.
Demand for the new two-year debt was expected to be strong, with investors keen to secure low-risk and highly liquid assets despite the paper carrying a below-inflation 0.25 percent coupon.
"With many investors fearing a sentiment change and German cash bond material scarce in this part of the curve, we look for decent demand in today's auction,» said Commerzbank strategist Marcel Bross in a note to clients.
On the data front, flash Purchasing Managers' Index data for February will provide the latest insight into the strength of the euro zone economy.