German bunds jump after August ZEW economic sentiment index disappoints investors; eyed on Q2 GDP

The German bunds jumped during European trading session Tuesday after the country’s ZEW economic sentiment index for the month of August disappointed market expectations, way lower than the previous reading in July.

Investors now shall be eyeing the country’s gross domestic product (GDP) for the second quarter of this year, due on August 14 by 06:00GMT for further direction to the debt market.

The German 10-year bond yields, which move inversely to its price, slipped nearly 1-1/2 basis points to -0.607 percent, the yield on 30-year note slumped nearly 4 basis points to -0.132 percent and the yield on short-term 2-year traded 2 basis points down at -0.873 percent by 10:40GMT.

There were no surprises from today’s final German inflation figures for July, which showed the headline EU-harmonised CPI rate unrevised from the flash estimate at 1.1 percent y/y, down 0.4ppt from June and the lowest since November 2016, Daiwa Capital Markets reported.

While there was upwards pressure from food and clothing price inflation last month, the core inflation measure on the harmonised basis fell 0.6ppt to 0.9 percent y/y reflecting a notable drop in recreational services inflation, not least reflecting lower prices of package holidays, the report added.

According to a report from Germany’s ZEW Institute, economic sentiment among investors plunged to -44.1 from -24.5 in July, its lowest level since December 2011, compared to a Reuters poll of a drop to -28.5.

Meanwhile, the German DAX slipped -0.76 percent to 11,591.40 by 10:50GMT.