German bonds flat ahead of Q2 GDP, ECB President Draghi’s speech

The German government bonds traded flat Thursday as investor wait to read the country’s second-quarter gross domestic product, scheduled to be released on August 25 by 06:00GMT. Also, the European Central Bank Governor Mario Draghi’s speech at the Jackson Hole Symposium tomorrow will remain a key focus of the day.

The German 10-year bond yields, which moves inversely to its price, hovered around 0.38 percent, the yield on 30-year note traded flat at 1.13 percent and the yield on short-term 2-year traded tad higher at -0.73 percent by 09:40GMT.

The euro area data flow this morning brought revised Spanish Q2 GDP data. In line with expectations, they aligned with the initial estimates reporting a slight acceleration in growth by 0.1ppt to 0.9 percent q/q, to leave output up 3.1 percent y/y. Today’s release provided the first official expenditure breakdown, which confirmed that the expansion remained relatively broad based. As has been the case over recent years, household consumption provided the largest contribution to GDP growth.

Indeed, this component of spending accelerated, up 0.7 percent q/q from a growth of 0.4 percent q/q in Q1. This was in part offset by a moderation in government consumption, while fixed investment growth slowed to 0.8 percent q/q from more than 2 percent q/q in Q1. But there was also a positive contribution from net trade for the fourth quarter out of the past five. All indications are that firm growth has been sustained into the current quarter, although we forecast a slight moderation to 0.7 percent q/q.

Meanwhile, the INSEE French business climate survey, also released this morning, reinforced the positive message from yesterday’s flash PMIs and Commission consumer confidence index. In particular, the headline business climate indicator rose for a fourth consecutive month in August, from 108 to 109, a level last seen in June 2011.

The improvement reflected more upbeat sentiment in the manufacturing and services sectors, with the relevant indicators rising by 3 and 2 points to 111 and 106 respectively. In contrast, the construction and retail sector firms saw reported a slight deterioration in business confidence, but their respective readings remained firmly above their long-term averages.

Meanwhile, the German DAX fell 0.06 percent to 12,219.00 by 09:40 GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 56.43 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest