German bunds narrowly mixed after September IP disappoints; trade balance in focus

The German bunds remained narrowly mixed during European session Thursday after the country’s industrial production (IP) for the month of September disappointed market sentiments, while investors still keep a curious eye on the trade balance for the similar period, scheduled to be released on November 8 by 07:00GMT, for further direction in the debt market.

The German 10-year bond yield, which move inversely to its price, gained 1 basis point to -0.315 percent, the yield on 30-year note hovered around 0.189 percent and the yield on short-term 2-year traded flat at -0.631 percent by 09:30GMT.

The decline in industrial production in September confirms that German manufacturers are still firmly in a recession. The 0.6 percent m/m fall in industrial production, which leaves output 4.3 percent below its level a year earlier, was a little worse than most economists had anticipated (Consensus -0.4 percent), Capital Economics reported.

Production excluding energy and construction, which tend to be volatile, fell more sharply (-1.3 percent), which indicates that the situation for manufacturers is worse than the headline production figures suggest, the report added.

Lastly, October saw the headline seasonally adjusted IHS Markit Germany Construction Purchasing Managers’ Index (PMI) – a measure of month-on-month changes in total industry activity – climb to 51.5, up from 50.1 in September and rebounding further from a five-year low in August. Though the highest reading since April, it signalled only a modest rate of growth overall.

Meanwhile, the German DAX edged nearly 1 percent higher at 13,292.56 by 09:40GMT.