LONDON, March 20 (Reuters) - German Bund futures slipped at the open on Tuesday, tracking weaker U.S. Treasuries overnight after Dallas Federal Reserve President Richard Fisher cooled expectations of more liquidity injections into the U.S. financial system.
Fisher is an outspoken hawk who has been critical of the Fed's last round of asset purchases. He was speaking at a roundtable discussion in London.
"Treasuries just dribbled off a bit after we went home yesterday and Bunds are just following suit. We were trying to recover a bit of ground yesterday and the hawkish comment from Fisher has turned things around a bit," a trader said.
The June Bund future was eight ticks lower at 135.52 compared with 136.60 at Monday's settlement while 10-year German yields were broadly steady at 2.05 percent.
The 10-year yield broke last week above 2 percent, the upper end of a range it had held for most of the year, as upbeat economic data and a flood of cheap central bank liquidity boosted riskier assets such as equities.
"The outright market remains vulnerable but Bunds should pause for breath after 10-year yields have moved above 2 percent and speculative U.S. Treasury positioning has turned net short," Commerzbank strategists said in a note.
"We remain defensive but for now will stick with yesterday's tactically neutral suggestion."
Spanish bonds were set to continue underperforming Italian peers after ratings agency Moody's said Spain's fiscal outlook remained challenging despite recently softened deficit targets although it said this did not affect the country's A3 bond rating with negative outlook.