German bunds gain after industrial production disappoints; investors eye 10-year auction

The German government bunds gained Tuesday after the country’s industrial production disappointed, in contrast to market expectations. Also, investors are eyeing the 30-year auction, scheduled to be held on February 8 amid a timid trading session that lacked release of significant economic data.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell over 1 basis point to 0.36 percent, the long-term 30-year bond yields also slipped 1 basis point to 1.13 percent and the yield on short-term 2-year bond slipped 1/2 basis point to -0.74 percent by 08:40 GMT.

Weaker output in manufacturing and construction drove the biggest monthly drop in German industrial production in nearly eight years, data showed on Tuesday. Industrial output fell by 3.0 percent on the month, data from the Economy Ministry showed. This was much weaker than the consensus forecast in a Reuters poll for a rise of 0.3 percent and the steepest drop since January 2009.

The German bunds have been closely following developments in the U.S. debt market. The U.S. benchmark 10-year bond yields fell 1 basis point to 2.41 percent, from Friday’s low of 2.41 percent.

Meanwhile, the German stock index DAX Index traded 0.05 percent higher at 11,515.50 by 08:20 GMT, while at 8:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -27.83 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex