German bunds trade flat ahead of ECB policy decision

The German bunds traded nearly flat Thursday as investors await the European Central Bank monetary policy decision, where there is a chance of another small deposit rate cut.

The yield on the benchmark 10-year bond, which moves inversely to its price, remained steady at -0.111 percent, the yield on long-term 30-year note hovered around 0.430 percent mark and the yield on short-term 2-year bond stood flat at -0.666 percent by 08:50 GMT.

The European Central Bank monetary policy meeting that concludes with President Mario Draghi's press conference is scheduled to take place on Thursday by 12:30 GMT and it is widely expected to result in a decision to extend the central bank's quantitative easing programme.

We no longer expect a rate cut and think that a decision to extend quantitative easing beyond March 2017 will be taken only in December. In addition, we think the staff will assume only a modest 0.2 percentage point hit to the level of GDP from the Brexit vote, taking a tenth off 2017 and a bit off 2018, said JP Morgan in its research report.

We foresee that the President Mario Draghi is likely to make some technical adjustments to it, but little of broad market significance. The President will reiterate the ECB's easing bias but will probably stop short of signalling any further action.

Lastly, the German bunds have been closely following developments in oil markets because of their impact on inflation expectations. Crude oil prices rebound after the US crude stocks surprisingly plunged by 12.1 million barrels last week, data from the American Petroleum Institute showed after market settlement on Wednesday, compared with expectations for an increase of around 200,000 barrels. The International benchmark Brent futures rose 1.73 percent to $48.81 and West Texas Intermediate (WTI) jumped 2.02 percent to $46.42 by 08:50 GMT.

Meanwhile, the German stock index DAX Index traded 0.06 percent lower at 10,746.90 by 08:50 GMT.