A better-than-expected investor sentiment reading reversed a slide in Germany's 10-year government bond yield on Tuesday, after a virus outbreak in China had put investors in a risk-off mood. The ZEW research institute said its monthly survey showed economic sentiment among investors rose to 26.7 from 10.7 in December.

Economists had expected an increase to 15.0. The result suggested investors believe the German economy might not be hurt as badly by trade tensions as previously thought. A separate measurement of how investors assess the economy's current conditions improved to -9.5 from -19.9 in the previous month. Analysts had forecast a reading of -13.5.

The 10-year German government bond yield was last flat at -0.248%. Earlier, it had hit a two-week trough, falling as low as -0.256%. US 10-year Treasury yields also fell by an even larger extent to 1.766%, their lowest since Jan. 8, trading last down 6 bps at 1.778%.

Yields across other euro zone economies were stable. Investors said the yield had been pushed lower by reports of an outbreak of the coronavirus in China, where the death toll rose to six and authorities reported a surge in new cases.

The virus "may weigh on China's economic activity and consumer spending," which in turn may weigh on global growth, said Rainer Guntermann, a rates strategist at Commerzbank. Weaker growth in the world's second largest economy would steer investors from taking more bets and being more active in the financial markets.

The German surveys follow a pick-up in data releases in recent weeks, which has prompted economists to conclude that euro zone economic activity has probably bottomed out. ."If you look at the nature of it, I'm not sure this should give some additional information that is beyond the consensus of the investor community," said ING senior rates strategist Antoine Bouvet.

"This is not something like the Ifo that is purely rooted in the business community, which is giving us additional information," he said, referring to another closely followed German survey, based on data from around 9,000 firms across various sectors.