German bunds slump ahead of October manufacturing PMI, ECB’s monetary policy decision

The German bunds slumped during European session Monday ahead of the country’s manufacturing PMI for the month of October, scheduled to be released on October 24 by 08:30GMT and the European Central Bank’s (ECB) monetary policy meeting, also due to be held on the same day by 11:45GMT

The German 10-year bond yield, which move inversely to its price, jumped 3-1/2 basis points to -0.350 percent, the yield on 30-year note surged 4 basis points to 0.157 percent while the yield on short-term 2-year traded flat at -0.664 percent by 10:45GMT.

The main event in the euro area in the coming week will be the conclusion of the ECB’s Governing Council meeting on Thursday. The meeting will be most notable for being the final one to be chaired by Mario Draghi before Christine Lagarde takes over as ECB President at the start of next month. Policy-wise, however, the meeting will be a non-event, Daiwa Capital Markets reported.

After the Governing Council last month agreed a package of new measures – including a 10bps cut in the deposit rate, an open-ended programme of net asset purchases to start on November 1, a tiered rate framework to start on October 30, and more generous conditions on the TLTRO-III operations – the outlook for policy seems unlikely to be discussed at the meeting, the report added.

However, the much-publicised differences of opinion on the Governing Council will no doubt be a focus of the press conference. Moreover, Draghi might also be questioned on the desirability of the upwards shift in yields across the curve since the September meeting, which is in part likely related to the planned tiering framework, Daiwa further noted in the report.

Meanwhile, the German DAX remained tad higher at 12,719.35 by 10:50GMT.