German bunds gain on weak risk appetite, crude oil prices tumble ahead of OPEC meeting

The German bunds gained Monday as investors poured into safe-haven instruments amid losses in riskier assets including equities and crude oil.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 2-1/2 basis points to 0.21 percent, the yield on long-term 30-year note dipped nearly 3 basis points to 0.86 percent and the yield on short-term 2-year bond slid 1/2 basis point to -0.75 percent by 09:00 GMT.

The German bunds have been closely following developments in the U.S. debt market. The United States benchmark 10-year Treasury yield declined 6 basis points to 2.31 percent. We foresee that the 10-year German yield to hover in the range of 0.20-0.30 percent over next couple of weeks.

The German bunds as follows developments in oil markets because of their impact on inflation expectations. Crude oil prices fell after Saudi Arabia cancels its meeting with non-OPEC members, including Russia. The International benchmark Brent futures fell 0.68 percent to $47.90 and West Texas Intermediate (WTI) dipped 1.02 percent to $45.59 by 09:00 GMT.

Germany’s economic growth slowed in the third quarter of 2016 in the wake of weaker exports and minimal investment. The third quarter gross domestic product (GDP) growth remained unchanged at 1.5 percent y/y, lower than the market expectations of 1.7 percent y/y increase, from prior 1.5 percent. On a quarterly basis, it also stood flat at 0.2 percent q/q.

Also, German exports fell 0.4 percent q/q, from previous up 1.2 percent as Donald Trump presidency threatened to dent Germany's trade prospects.

ECB President Draghi, speaking to the European Parliament, said that monetary support is needed to hit the European Central Bank's inflation target, even as monetary policy needs 'decisive' support from other actors.

Lastly, investors will remain keen to focus on the upcoming economic data, highlighted by CPI, retail sales, unemployment rate, manufacturing PMI.

Meanwhile, the German stock index DAX Index traded 1 percent lower at 10,590 by 09:00 GMT. While at 09:00 GMT, the FxWirePro's Hourly Euro Strength Index remained highly bullish at +106.50 (higher than +75 represents bullish trend).