Eurozone periphery bonds slump ahead of German industrial production; ECB meeting in focus

The Eurozone periphery bonds slumped Thursday as investors remained cautious ahead of Germany’s industrial production data, for the month of June, scheduled to be released on July 6. Also, the European Central Bank’s (ECB) June Governing Council meeting, due today will add further direction to the debt market.

The benchmark German 10-year bond yields, which moves inversely to its price, jumped 5 basis points to 0.52 percent, the French 10-year bond yields surged 6-1/2 basis points to 0.87 percent, Irish 10-year bond yields also climbed nearly 6 basis points to 0.93 percent, Italian up 7-1/2 basis points to 2.21 percent, Netherlands 10-year bond yields higher nearly 6-1/2 basis points to 0.72 percent, Portuguese equivalents nearly 5 basis points higher at 3.01 percent while the Spanish 10-year yields traded flat at 1.56 percent by 09:40 GMT.

The German construction sector remained in a strong expansionary phase in June. Adjusted for seasonal factors, the headline Purchasing Managers’ Index (PMI) remained well above 50.0 in June, indicating strong growth in German construction activity. The PMI posted 55.1, little-changed since 55.3 in May, indicating the third-fastest rate of growth since March 2016.

The focus in the euro area today will be the account from the ECB’s June Governing Council meeting which will be analysed for any further insight into the likely timing of the ECB’s announcement of a gradual tapering. Data-wise, ahead of tomorrow’s release of the latest industrial production figures, this morning’s German factory orders figures showed a 1 percent m/m rise in May after a fall of more than 2.0 percent m/m in the previous month.

Lastly, tomorrow’s German industrial production data are also likely to be weaker, although it is important to note that in recent months these factory orders data have been volatile and therefore not a particularly good guide to industrial production growth.

Meanwhile, the pan-European STOXX 600 index was down 0.55 percent to 380.89, German DAX fell 0.63 percent to 12,376.00, France’s CAC 40 slumped 0.84 percent to 5,136.25 and the PSI20 Index traded 0.80 percent lower at 5,161.57 by 09:40 GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index stood neutral at -52.38 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest