The German bunds traded significantly lower Thursday as global bond markets retreated from previous gains. Also, firm equities drove-out investors from safe-haven buying.
The yield on the benchmark 10-year bond, which moves inversely to its price, rose 1-1/2 basis points to -0.044 percent, the yield on long-term 30-year note bounced 3 basis points to 0.487 percent and the yield on short-term 3-year bond climbed 1 basis point to -0.633 percent by 09:30 GMT.
Higher than expected Chinese official manufacturing PMI supported the bund yields, it rose to 50.4 in August, higher than the consensus of 49.8, as compared to previous 49.9 in July. It is worth noting that any print above the 50-level indicates growth, while one below it represents a slowdown.
On Wednesday, the Eurozone preliminary August CPI inflation rate comes in at 0.2 percent y/y, unchanged from the previous month and below the consensus forecast of 0.3 percent. This is not surprising in light of the downward surprise in the German CPI reported yesterday.
Additionally, the ex-energy & unprocessed food rate also remained unexpectedly steady at 0.8 percent y/y. Therefore, this report will keep the ECB concerned about too-low inflation in its monetary policy meeting, which is scheduled to deliver monetary policy on September 8. We foresee that there are higher possibilities of another small deposit rate cut by the central bank.
On Tuesday, Germany's Federal Statistical Office in its report showed that country’s consumer price index (CPI) remained steady at 0.4 percent y/y, a bit lower than the market expectations of 0.5 percent y/y rise, as compared to 0.4 percent in July. On the monthly CPI was flat, from 0.3 percent in July.
Moreover, Harmonized Index of Consumer Prices (HICP) fell 0.1 percent in August, against 0.4 percent print in July. On an annual basis, HICP slowed to a rise of 0.3 percent y/y, from 0.4 in July.
In addition, investors await the Friday's US jobs data as it could be used to anticipate the Fed's most likely step to raise the interest rate.
Meanwhile, the German stock index DAX Index traded 0.63 percent higher at 10,660 by 09:30 GMT.
