German bunds gain ahead of August employment report, consumer price inflation

The German bunds gained during European trading session Wednesday ahead of the country’s employment report for the month of August, scheduled to be released on August 29 by 09:40GMT and the consumer price inflation (CPI) data for the similar period, due on the same day by 12:00GMT will provide further direction in the debt market.

The German 10-year bond yield, which move inversely to its price, slipped 1 basis point to -0.705 percent, the yield on 30-year note suffered 2 basis points to -0.244 percent and the yield on short-term 2-year traded tad down at -0.891 percent by 09:10GMT.

Germany’s GfK consumer survey beat expectations, with the headline index steady at 9.7, a level which nevertheless matched the lowest in 27 months. Within the detail, the survey flagged a welcome increase in propensity to buy, albeit at a level still down on this time last year. Income expectations deteriorated only slightly, Daiwa Capital Markets reported.

But tallying with the recent marked worsening in business sentiment as highlighted starkly in the August ifo indices, optimism with respect to the economic outlook plunged to the lowest in more than 6½ years. Of course, it’s a lack of external demand rather than domestic household demand that explains Germany’s current economic funk, the report added.

"And while today’s survey suggests that we shouldn’t expect consumer spending suddenly to hit the reverse gear, nor does it suggest large-scale support to growth from the household over the near term. And given the Ifo survey, we maintain our forecast of another slight contraction in German GDP in Q3," Daiwa further commented.

Meanwhile, the German DAX traded tad -0.47 percent lower at 11,672.81 by 09:15GMT.