German bunds gain ahead of August ZEW economic sentiment index, Q2 GDP

The German bunds gained during European trading session Monday ahead of the country’s ZEW economic sentiment index for the month of August, scheduled to be released on August 13 by 09:00GMT and the gross domestic product (GDP) for the second quarter of this year, due on the following day by 06:00GMT shall provide further direction to the debt market.

The German 10-year bond yields, which move inversely to its price, slipped 1 basis point to -0.590 percent, the yield on 30-year note suffered nearly 1-1/2 basis points to -0.084 percent and the yield on short-term 2-year too traded nearly 1-1/2 basis points down at -0.878 percent by 10:30GMT.

Data-wise, Wednesday will be the busiest day of the week in the euro area, with several releases due including the first estimate of German Q2 GDP. Given the weakness in industrial output and construction in the second quarter, as well as softer retail sales growth, a slight drop in German GDP of 0.1 percent q/q is now the consensus, supporting the case for a significant relaxation of fiscal policy at a time when the entire Bund yield curve is in negative territory, Daiwa Capital Markets reported.

Euro area IP data for June due the same day are likely to confirm a notable drop in the second quarter, but the updated estimate of euro area GDP growth due that day is expected to align with the flash estimate of 0.2 percent q/q (half the pace of Q1), the report added. 

Against this backdrop, euro area labour market figures (also due Wednesday) are likely to show only a slight moderation in employment growth in Q2 from 0.3 percent q/q in Q1, Daiwa further noted in the report.

Meanwhile, the German DAX slipped -0.16 percent to 11,677.10 by 10:35GMT.