German bunds rise modestly on weak risk appetite, 10-year auction in focus

The German bunds traded modestly higher Monday as investors poured into safe-haven instruments amid losses in riskier assets including equities and crude oil.

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.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 1-1/2 basis points to 0.29 percent, the long-term 30-year bond yields dipped more than 1 basis point to 1.05 percent and the yield on short-term 2-year bond slid 1/2 basis point to -0.73 percent by 09:00 GMT.

The German bunds have been closely following developments in oil markets because of their impact on inflation expectations. Crude oil prices fell as Iran’s exports surged amid rise in U.S. oil rig count. The International benchmark Brent futures fell 0.63 percent to USD56.74 and West Texas Intermediate (WTI) skid 0.57 percent to USD53.68 by 9:05 GMT.

Moreover, the German debt market has shrugged off the country’s trade surplus that surged in November following stronger growth in exports. The country’s trade balance came at EUR22.6 billion, from EUR20.5 billion in November last year.

Further, exports increased 3.9 percent in November, extending from previous month gains of 0.5 percent, while imports rose 3.5 percent following a 1.2 percent advance the previous month.

Lastly, market will now be focussing on the upcoming 10-year auction on Wednesday for future trading direction.

Meanwhile, the German stock index DAX Index traded 0.39 percent lower at 11,553.00 by 09:10 GMT, while at 9:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 59.34 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex