German bunds gain on weak risk appetite; ECB’s policy decision eyed

The German bunds gained on Tuesday as investors poured into safe-haven instruments amid losses in riskier assets including crude oil and stocks. Also, investors remain cautious ahead of the European Central Bank policy decision, scheduled to take place on Thursday at 11:00 GMT.

The yield on the benchmark 10-year bond fell 3 basis points to -0.047 percent, the yield on long-term 30-year note also dipped 3 basis points to 0.490 percent and the yield on short-term 2-year note slid nearly 1 basis point to -0.652 percent by 08:10 GMT.

The German bunds have been closely following developments in oil markets because of their impact on inflation expectations. Today, oil prices eased as concerns over a crude and refined fuel surplus outweighed an expected cut in U.S. shale production. The International benchmark Brent futures fell 0.68 percent to $46.62 and West Texas Intermediate (WTI) tumbled 0.64 percent to $44.95 by 08:10 GMT.

The European Central bank is also expected to leave interest rates intact in its monetary policy meeting scheduled to be held on July 21 and the meeting will be dominated by Brexit. Also, the European Central Bank will not ease monetary policy any further at its meeting next week, according to an overwhelming majority of respondents in a Reuters poll of euro money market traders on Monday.

There is also a good chance that the ECB may adjust its bond-purchase programme to raise the allocation to the higher-yielding, more indebted countries, due to the increasing shortage of government bonds meeting the central bank's minimum yield of -0.4 percent. Flash Eurozone sectoral PMIs for July are also awaited, as is the German ZEW survey for July.

Lastly, investors will remain keen to focus on the PPI and PMI figures this week. Meanwhile, the German stock index DAX Index trading down 1.21 percent at 9,941 by 08:10 GMT.