German bunds nearly flat ahead of 10-year auction

The German bunds traded nearly flat Tuesday, succumbing to thin trading activity during a relatively quiet session that witnessed data of little significance. Also, markets will be closely eyeing the upcoming 10-year note auction scheduled late today for further direction in the debt market.

The yield on the benchmark 10-year bond, which moves inversely to its price, rose 1/2 basis point to 0.28 percent, the long-term 30-year bond yields barely climbed 1/2  basis point to 1.06 percent and the yield on short-term 2-year bond struggled at slightly higher than 1 basis point to -0.72 percent by 09:20 GMT.

We foresee that bond prices will keep drifting between small gains and losses ahead of the European Central Bank monetary policy meeting, which is scheduled to take place on January 19.

In addition, the German BDI industry association said that they expect that the country will grow around 1.5 percent in 2017 and looks forward to employment of around 500,000 more people. However, it also mentioned that the economy will be hurt if Trump limits free trade and market access to the United States.

Lastly, the German bunds have been closely following developments in oil markets because of their impact on inflation expectations. Crude oil prices recovered in afternoon session on speculations of some planned output cuts agreed by OPEC and non-OPEC producers. The International benchmark Brent futures moved higher 0.38 percent to USD55.13 and West Texas Intermediate (WTI) rose 0.46 percent to USD52.20 by 9:30 GMT.

Meanwhile, the German stock index DAX Index traded almost flat at 11,569 by 09:30 GMT, while at 9:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 60.50 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex