German bunds slump after October manufacturing PMI cheers markets; 10-year auction in focus

The German bunds slumped Tuesday after the country’s manufacturing PMI for the month of October succeeded to cheer markets, coming in a tad higher than expectations and from the previous reading in September. Also, markets await the European Central Bank’s (ECB) monetary policy decision, to be unveiled on October 26 by 11:45GMT.

The German 10-year bond yields, which move inversely to its price, slumped nearly 2 basis points to 0.43 percent, the yield on 30-year note slid nearly 1-1/2 basis points to 1.24 percent and the yield on short-term 2-year traded 1 basis point lower at -0.72 percent by 08:30GMT.

Markit’s preliminary German manufacturing PMI for October was expected to tick down from 60.6 to 60.2 points. These levels, above 60 points, reflect very strong growth in the forward-looking data. The services PMI was predicted to remain unchanged at 55.6 points.

The crisis in Catalonia looms above the euro. Spain is about to impose direct rule over the north-eastern region and it isn’t likely to go down quite well. Things will come to a head on Thursday and Friday, with debates in the Catalan parliament and the Spanish Senate.

Meanwhile, the German DAX traded 0.14 percent higher at 13,020.75 by 08:35 GMT, while at 08:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 47.46 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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