German bund yields rise modestly with riskier assets; BOE’s policy decision eyed

The German bund yields bounced on Thursday as investors cooled on safe-haven instruments amid gains in riskier assets including crude oil and equities. Also, investors wait for the Bank of England monetary policy decision scheduled to take place on Thursday by 11:00 GMT.

The yield on the benchmark 10-year bond rose more than 1 basis point to -0.131 percent and the yield on long-term 30-year note climbed 2 basis points to 0.438 percent by 08:40 GMT.

The German bunds have been closely following developments in oil markets because of their impact on inflation expectations. Today, crude oil prices rebounded on weak US dollar and lower than expected US crude oil stockpiles. The International benchmark Brent futures rose 0.69 percent to $46.53 and West Texas Intermediate (WTI) jumped 0.74 percent to $45.08 by 08:40 GMT.

Moreover, the Bank of England is also expected to ease interest rates in its monetary policy meeting, in an attempt to ease the growing anxiety over the possible breakdown after the Brexit outcome.

The UK as it could herald the first BoE Bank Rate cut since Feb 2009. There is a low probability, but non-negligible risk, that the central bank also resumes its programme of asset purchases, financed through reserves issuance, although this is more likely in August. So it is likely that we see a 25 basis points rate cut on Thursday that takes the Bank Rate down to a record low 0.25 percent.

On Wednesday, Germany issued a 10-year bond at a negative interest for the first time today in the Eurozone area, selling more than 4 billion Euros with a yield of -0.05 percent. Germany is the 7th nation to auction 10-year bond with a negative yield.

Meanwhile, the German stock index DAX Index climbed 1.48 percent at 10,078 by 08:40 GMT.