German bunds jump after December industrial production plunges beyond estimates

The German bunds jumped during European trading session Friday after the country’s industrial production for the month of December  plunged, disappointing market expectations as well, while the trade balance for the similar month offset the fall in bond yields.

The German 10-year bond yield, which move inversely to its price, lost 2-1/2 basis points to -0.390 percent, the long-term 30-year yield plunged 3-1/2 basis points to 0.129 percent and the yield on short-term 2-year fell 1 basis point to -0.643 percent by 11:10GMT.

Total industrial production in December reportedly fell 3.5 percent m/m, the steepest drop since January 2009, to the lowest level since August 2014. Within the detail, manufacturing output fell 2.9 percent m/m similarly to the lowest level in more than five years. Production of capital goods was down 3.5 percent m/m, with autos down a similar 3.6 percent m/m, also to the lowest level since August 2014, Daiwa Capital Markets reported.

Production of consumer (-2.0 percent m/m) and intermediate goods (-2.6 percent m/m) fell sharply too. But the decline in the manufacturing sector was nothing compared to construction, where this morning’s data suggest that production fell an unfeasibly large 8.7 percent m/m to the lowest level since February 2018. Given the strong fundamentals and sentiment in the sector, as well as mild weather, that seems implausible, and we fully expect an upwards revision in due course, the report added.

Meanwhile, the German DAX traded tad -0.57 percent lower at 13,496.16 by 11:15GMT.