Germany's Treasury failed to attract the minimum amount of bidders for a sale of 2-year notes Tuesday that could suggest investors are slowly moving cash into riskier markets as concerns over regional political stability continue to fade.

Germany had planned to sell €4 billion in 2-year bonds, known as Schatz, which trade with no coupon and a negative interest rate, as part of its regular financing operations. However, investors only bid for around €3 billion of the paper on offer, a move that is often called a "technical failure" by bond traders but is more likely a signal that safe-haven assets that guarantee buyers an ultimate loss are no longer attractive as the region's economic prospects improve. 

Investors bought €2.89 billion at the Tuesday auction at a yield-to-maturity of -0.71%, down from -0.92% at the last auction in February, when more than €7 billion in bids were put to officials in Berlin.

Tuesday's sale follows a series of positive readings for both broader Eurozone growth and the political uncertainly that has gripped its two biggest economies.  

The latest polls from France, published Tuesday, suggest the centrist candidate Emmanuel Macron will easily defeat his far-right (and anti-European) rival, Marine Le Pen, if the two were to face each other in a May 7 runoff in the second round of the country's Presidential elections.

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The extra yield, or spread, that investors demand to hold benchmark 10-year French governments bonds instead of those issued by Germany narrowed to just 0.55%, the slimmest in more than two months. 

Political sentiment was also boosted by an important win for Chancellor Angela Merkel's Christian Democratic Union in a regional election in the southwestern district of Saarland over the weekend. The win, which saw a key Merkel ally gain more than 40% of the vote, also pushed her Social Democratic rivals into a distant second in the first electoral test for their new leader, former EU Parliament President Martin Schulz.

Both the Ifo business gauge and the developing political narrative have important implications for European growth just as the region's recovery is starting to take hold.

Last week, the IHS Markit Composite PMI reading of private sector activity in the Eurozone surged to 56.7 in March, the fastest pace in just under six years, with the manufacturing sector powering the advance in Germany and services supporting growth in France.

In Germany, the rate of private sector job growth was the strongest since March of 2011 while both input and output prices accelerated at a six-year high pace. Collectively, the figures suggest a headline inflation rate of around 2.1% for the whole of 2017, IHS Markit economist Trevor Calchin.

"Inflationary pressures continued to build, with input and output prices both rising at the fastest rates in around six years," he said. "IHS Markit is currently forecasting headline inflation to reach 2.1% over 2017 as a whole, and the latest official monthly data showed that consumer price inflation hit 2.2% in February - a four-and-a-half year high."