German bunds trade range bound ahead of Fed policy meeting

The German bunds traded range bound during a relatively quiet session Monday that witnessed data of little significance. Investors’ clear focus remained on the Federal Reserve monetary policy decision scheduled to be held on Wednesday.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 1/2 basis point to -0.004 percent, the yield on long-term 30-year note climbed 1 basis point to 0.643 percent and the yield on short-term 2-year bond remained steady at -0.654 percent by 08:40 GMT.

The German 10-year bund yields again turned negative after a week on Friday as the United States Federal Reserve September rate hike hopes faded after reading a series of disappointing economic data released last Thursday.

Moreover, the United States Federal Reserve in its meeting scheduled on September 20-21 and it is widely expected to leave its interest rates on hold, despite concerns that the strength of the world’s largest economy warrants a rise in borrowing costs. The September FOMC statement as a potential rude awakening for markets who have come to interpret 'data dependence' to mean everything has to be perfect for the FOMC to act.

Given the continued support from labour markets and gradual improvement in pricing measures, coupled with a closing window ahead of the November elections, September sets itself up as quite possibly the best time to act (particularly given that supportive data is not something that can be a guarantee come the December meeting).

Meanwhile, the German stock index DAX Index traded 0.75 percent higher at 10,352.75 by 08:40 GMT.