German bunds suffer after Q1 GDP remains unchanged; eyes on ECB’s account of monetary policy meeting

The German bunds suffered during European session Thursday after the country’s gross domestic product (GDP) for the first quarter of this year, released early today, remained unchanged. Investors will now be focusing on the European Central Bank’s (ECB) account of the monetary policy meeting, scheduled to be released today by 11:30GMT for further direction to the debt market.

The German 10-year bond yields, which move inversely to its price, jumped 1-1/2 basis points to 0.51 percent, the yield on 30-year note surged nearly 2 basis points to 1.24 percent and the yield on short-term 2-year traded nearly 1 basis point higher at -0.60 percent by 08:15GMT.

While the second release of Q1 German GDP this morning showed no changes to the previous estimates of 0.3 percent q/q and 2.3 percent y/y growth, the expenditure breakdown, released for the first time, was broadly favorable. Investment, which rose 1.7 percent q/q, was the main driver of the economy last quarter, but private consumption also provided a positive contribution despite some weak indicators from the retail sector.

The ECB will publish the account of its April monetary policy meeting when the deterioration in the economic data-flow – which continued yesterday with the further drop in the flash PMIs – was arguably the most notable topic under discussion.

"We suspect that the Governing Council will not have been overly alarmed, nor will it have considered the deterioration to merit a discussion of a change of policy strategy. The ECB will also publish its latest Financial Stability Review while Chief Economist Peter Praet will speak publicly," Daiwa Capital Markets commented in its latest research report. 

Meanwhile, the German DAX traded 0.09 percent higher at 12,988.42 by 08:15GMT, while at 08:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -38.38 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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