German bunds jump despite unchanged consumer inflation in September

The German bunds jumped Friday as investors have largely shrugged off the no-change in the country’s consumer price-led inflation index (CPI) for the month of September amid a silent trading session that witnessed fewer data of economic significance.

The German 10-year bond yields, which move inversely to its price, slumped 2 basis points to 0.42 percent, the yield on 30-year note plunged 2-1/2 basis points to 1.22 percent and the yield on short-term 2-year traded 1 basis point lower at -0.71 percent by 09:50GMT.

In remarks in Washington DC yesterday, Draghi gave few clues as to what to expect from the key Governing Council meeting on 26 October beyond emphasizing the importance of the current forward guidance on rates, i.e. that rates are expected to remain at their present levels “well past the horizon of our net asset purchases”.

However, a report on Bloomberg this morning claims that ECB officials have privately suggested that an extension of net asset purchases for at least nine months from January at a reduced monthly rate of EUR30 billion is a feasible option for the central bank’s next policy steps.

A relatively uneventful end to the week data-wise should be in store in the euro area. After French inflation in September on the EU measure was confirmed yesterday at the flash estimate of 1.1 percent y/y, up 0.1ppt from August,

This morning’s final German numbers also confirmed the preliminary estimate of CPI on the EU measure at 1.8 percent, unchanged from August. And later this morning Italian CPI is also expected to be confirmed at the respective flash estimate of 1.3 percent y/y, 0.1ppt lower than the previous month. If so, the final euro area numbers due next week would also seem bound to confirm the flash estimates (headline CPI 1.5 percent y/y, core CPI 1.1 percent y/y).

Meanwhile, the German DAX traded 0.09 percent higher at 12,995.50 by 09:55 GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 11.19 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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