German bunds narrowly mixed after February CPI meets expectations; 30-year auction in focus

The German bunds remained mixed Wednesday after the country’s consumer price inflation index (CPI) for the month of February met market expectations, also unchanged from that in January. Investors’ focus will now turn to the 30-year auction, scheduled for later in the day for further direction in the debt market.

The German 10-year bond yields, which move inversely to its price, hovered around 0.62 percent, the yield on 30-year note slipped to 1.27 percent and the yield on short-term 2-year traded nearly flat at 0.57 percent by 09:00GMT.

It should be a busier day for economic data in the euro area. The headline industrial production indices showed declines in all major economies that month and January aggregate figures for the euro area as a whole, due today, will most likely show drop of 1/2 percent m/m or more. That, however, should still leave the level of output more than 4 percent higher than a year earlier.

In addition, euro area employment data for Q4 are likely to show continued jobs growth of around 1.7 percent y/y or more, representing the strongest pace in a decade. Separately, final February inflation numbers from Germany, already released this morning, fully aligned with the flash estimates which saw the EU-harmonised measure decline 0.2ppt to 1.2 percent y/y, the lowest level since November 2016.

With yesterday’s equivalent Spanish data similarly having confirmed the preliminary estimate on the EU-harmonised measure of 1.2 percent y/y, up 0.5ppt from January, the final euro area inflation figure, due at the end of the weak, also appears to be on track to be unrevised at 1.2 percent y/y. Today’s newsflow could also bring new insights into the monetary policy outlook with speeches from ECB President Draghi, Vice President Constâncio and Chief Economist Praet.

Meanwhile, the German DAX rose 0.13 percent to 12,245.48 by 09:05GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 0.48 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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