German bunds tad higher despite higher-than-expected rise in December Ifo business climate index

The German bunds remained tad higher during European session Wednesday despite a better-than-expected rise in the country’s Ifo business climate index for the month of December, along with a rise in eurozone’s November consumer price inflation (CPI), albeit meeting market expectations.

The German 10-year bond yield, which move inversely to its price, remained flat at 0.292 percent, the yield on 30-year note traded tad down at 0.216 percent and the yield on short-term 2-year too remained steady at -0.647 percent by 11:15GMT.

The increase in the Business Climate Index (BCI) from 95.1 in November to 96.3 was much better than either we or the consensus anticipated, and took it to a six-month high. Both the current conditions and the expectations components rose on the month, Capital Economics reported.

However, the index is still below its average level for this year, and well below the highs of over 105 seen at the start of 2018. On past form, it is consistent with GDP growth of about zero. And the expectations component of the BCI, which has historically been a good leading indicator of GDP, points to the economy contracting in year-on-year terms, the report added.

"December’s Ifo Business Climate Index was a bit better than expected, but it still suggests that the German economy is struggling to grow. We expect GDP growth to remain very weak at the start of next year," Capital Economics further commented in the report.

Meanwhile, the German DAX edged tad -0.60 percent lower to 13,324.70 by 11:20GMT.