German 10-year bund yields rise to highest since May; October CPI in focus

The German 10-year bund yields touched its highest levels since May on Friday as inventors moved away from safe-haven buying amid rising speculations about the Federal Reserve interest rate hike.

We would expect the yields to stay in the range of 0.10-0.20 percent in the short-term, with an upward break likely eventually but not imminently.

The yield on the benchmark 10-year bond, which moves inversely to its price, rose more than 8 basis points to 0.20 percent intra-day, the yield on long-term 30-year note climbed 5 basis points to 0.816 percent and the yield on short-term 3-year bond bounced 3 basis points to -0.591 percent.

The German bunds have been closely following developments in oil markets because of their impact on inflation expectations. Crude oil prices declined as investors cashed in profit after relishing the previous rallies. The International benchmark Brent futures fell 0.14 percent to $50.41 and West Texas Intermediate (WTI) dipped 0.30 percent to $49.57 by 09:00 GMT.

The Munich-based Ifo institute’s business climate index climbed to 110.5 from 109.5 in September. Ifo’s measure of current economic conditions rose to 115 from 114.7, according to the report. A gauge of expectations improved to 106.1 from 104.5.

Additionally, Germany’s activity sector output rebounded during the month of October, following solid co-operation from private sector output, with the country’s composite Purchasing Managers’ Index (PMI) touching a 3-month high during the period.

Flash Germany PMI Composite Output Index rose to 55.1 in October, from 52.8 in September. Also, lash flash services PMI Activity Index jumped to 54.1 this month, from 50.9 in September, while the flash index for the country’s manufacturing sector rose to 55.1 in October, a33-month high, from 54.3 in the previous month; flash Germany manufacturing Output Index modestly rose to 56.9, compared to 56.4 in September, data released by HIS Markit showed Monday.

Lastly, investors will remain keen to focus on the upcoming consumer inflation figure.

Meanwhile, the German stock index DAX Index traded 0.63 percent lower at 10,649 by 09:00 GMT.