ECB can provide further easing through more QE or deposit rate channel

Markets have been in risk-on mode since payrolls with stocks on both sides of the Atlantic rallying by 3-4%, oil prices rebounding by about 8%, EM assets rallying and DM bonds selling-off. 10y Bund, Treasury and Gilts have all sold off about 7-10bp on the week despite the fact that both German industrial production and factory orders data were notably weak.

Regarding the duration outlook for German rates, DM central bank dovishness emerging from the Fed, ECB and BoJ might impact 10y and longer Bund yields on a macro level depending on risky asset and oil price reaction was observed. 

"In the past week, there have been tentative signs that risky assets and oil prices are reacting constructively, however, it is still too early to be conclusive on this. The other important factor for the duration outlook will be what further potential easing from the ECB means for longer German rates", says Barclays. 

The ECB has two main channels to provide more accommodation, by making the existing QE programme more expansive, and/or introducing the deposit rate cut possibility.