German bunds trade mixed on disparate economic data; likely to waver ahead of ECB policy decision

The German bunds traded mixed Friday after recent data showed that the country’s retail sales rose more-than-expected in December. On the other hand, industrial orders fell more than expected in November after surging in the prior month.

We foresee that bond prices will keep drifting between small gains and losses ahead of the European Central Bank monetary policy meeting, which is scheduled to take place on January 19.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 1/2 basis point to 0.25 percent, the long-term 30-year bond yields dipped 1 basis point to 0.99 percent and the yield on short-term 2-year bond bounced 2 basis points to -0.70 percent by 09:20 GMT.

German retail sales rose by between 1.8 and 2.1 percent on the year in 2016 in real terms, a slightly slower growth rate than in the previous year, data showed on Friday. In 2015, German retail sales rose by 2.5 percent in real terms, the Federal Statistics Office said, Reuters reported.

For November, the volatile indicator which is often subject to revision showed retail sales fell by 1.8 percent on the month in real terms. On the year, retail sales were up 3.2 percent in real terms, the data showed, they added.

Additionally, factory orders in Germany fell during the month of November, worse than what markets had initially anticipated and also partially offsetting the investment-driven surge that occurred last month. Orders, adjusted for seasonal swings and inflation, dropped 2.5 percent from October, when they jumped a revised 5 percent, data released by the Economy Ministry in Berlin showed Friday. That compares with a median estimate of a 2.4 percent decline in a Bloomberg survey. Orders gained 3 percent from a year earlier.

Moreover, Germany’s consumer inflation rose 1.7 percent from a year ago, recording the biggest jump on record, the Federal Statistics Office in Wiesbaden said on Tuesday. Economists surveyed by Bloomberg predicted an increase of 1.3 percent. The reading is the strongest since July 2013 and follows a rate of 0.7 percent the previous month. Prices rose 1 percent from November.

Additionally, Germany Markit/BME services PMI rose to 54.3 in December, higher than the market expectations of 53.8, from previous 53.8 in November. Also, Markit's final composite Purchasing Managers' Index (PMI), rose to a five-month high of 55.2 in December from 55.0 in November.

German unemployment extended its decline in December amid signs that growth in Europe’s largest economy accelerated at the end of last year. The number of people out of work fell by a seasonally adjusted 17,000 to 2.638 million, data from the Federal Labour Agency in Nuremberg showed on Tuesday. Economists in a Bloomberg survey forecast a drop of 5,000. The jobless rate remained unchanged at 6 percent, matching the lowest level since reunification.

Meanwhile, the German stock index DAX Index traded 0.26 percent lower at 11,555.5 by 09:30 GMT. While at 09:00 GMT, the FxWirePro's Hourly Euro Strength Index remained slightly bullish at +91.03 (lower than +75 represent a bullish trend).