German bunds trade tad lower after manufacturing PMI tops market consensus; ECB policy decision in focus

The German bunds traded tad lower Thursday after the country’s manufacturing PMI for the month of December topped market consensus, adding to distraction in demand in the debt market. Also, investors are awaiting the European Central Bank’s (ECB) monetary policy decision, scheduled to be unveiled later today.

The German 10-year bond yields, which move inversely to its price, remained nearly flat at 0.32 percent, the yield on 30-year note traded tad higher at 1.15 percent and the yield on short-term 2-year remained steady at -0.73 percent by 08:45GMT.

The IHS Markit Flash Germany Composite Output Index climbed to an 80-month high of 58.7 in December, after registering 57.3 in the penultimate month of the year. Growth accelerated across both manufacturing and services, with the latter seeing the steepest rise in business activity for two years.

It was the goods-producing sector that continued to lead the way, however, recording the strongest expansion in output in almost seven years. The upturn in factory performance was highlighted by the IHS Markit Flash Germany Manufacturing PMI rising to a survey-record high of 63.3 in December, up from 62.5 in November.

"The results mean that IHS Markit’s forecast for annual GDP growth of 2.6% is looking good, with a slight chance of an even higher out-turn," said Phil Smith, Principal Economist at IHS Markit.

Meanwhile, the German DAX traded 0.29 percent down at 13,089.75 by 05:50 GMT, while at 08:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -36.74 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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