German bunds flat ahead of 10-year auction, February consumer price inflation

The German bunds remained flat during European session Tuesday ahead of the country’s 10-year auction, scheduled to be held on February 27 by 10:40GMT. Also the country’s consumer price inflation (CPI) data for the month of February, coupled with manufacturing PMI and unemployment change for the similar month, due by end of this week will add further direction to the debt market.

The German 10-year bond yields, which move inversely to its price, remained tad lower at 0.103 percent, the yield on 30-year note hovered around 0.735 percent and the yield on short-term 2-year too traded flat at -0.563 percent by 08:45GMT.

This morning’s consumer confidence survey results suggest that there has been no further significant loss of momentum in the euro area economy in the first quarter of 2019, at least as far as household spending is concerned. German consumer confidence remained little changed, according to the GfK survey, with the headline index moving sideways in the latest month at 10.8, the highest level since Q2 last year.

Supported by very favourable conditions in the labour market, income expectations remained robust, with consumers maintaining their most positive assessment in 1-1/2 years. However, expectations for the general economic situation deteriorated again, marking a fifth consecutive decline to the lowest level in three years. The survey once again highlighted that external factors are largely to blame for economic concerns, Daiwa Capital Markets reported.

Indeed, according to GfK, German consumers appear to worry that a rise in global protectionism against the backdrop of the US- China trade dispute might harm German exporters, while a possibility of a disastrous Brexit scenario also represents a significant downside risk.

With that in mind, the survey indicator for propensity to buy eased back towards the bottom of its recent range to leave its average this quarter unchanged from that in Q4. So, overall, the survey looks to be consistent with a similar rate of growth in German household consumption in Q1 to the 0.2 percent q/q rate seen in Q4, the report added.

Meanwhile, the German DAX remained 0.37 percent lower at 11,461.58 by 08:50GMT, while at 08:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 35.39 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex