German bunds jump ahead of April trade balance, eurozone’s Q1 GDP data

The German bunds jumped during European session Wednesday as investors wait to watch the country’s trade balance for the month of April and eurozone’s gross domestic product (GDP) for the first quarter of this year, scheduled on June 8 and June 7 by 06:00GMT and 09:00GMT respectively.

The German 10-year bond yields, which move inversely to its price, jumped 7 basis points to 0.43 percent, the yield on 30-year note surged nearly 4 basis points to 1.12 percent and the yield on short-term 2-year traded 2-1/2 basis points higher at -0.64 percent by 09:45GMT.

In the euro area, all eyes will remain on Italian politics. And having passed its confidence vote in the Senate yesterday evening, we fully expect Italy’s new government to do likewise in the Lower House when it faces its second confidence vote later today. In our opinion, ongoing volatility in the BTP market is a given.

This is a government that is deliberately set on a path of confrontation with the Brussels/Frankfurt consensus, whose rhetoric is bound to remain inflammatory, and whose stated policy programme is unaffordable, whether or not it’s phased in over a couple of years rather in one go. The key test, of course, will be the draft Budget proposals later in the year. But given the rhetoric and appetite for provocation (if not self-destruction), we see no reason to believe it will pass muster from the perspective of fiscal responsibility.  

Meanwhile, the German DAX rose 0.59 percent to 12,862.65 by 09:50GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 0.24 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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