German bunds gain ahead of two year debt auction

The German bunds gained on Wednesday as investors remained cautious ahead of the two-year bond auction, which is which is scheduled to take place on August 3 at 09:30 GMT,

The yield on the benchmark 10-year bond fell 1-1/2 basis points to -0.044 percent, the yield on long-term 30-year note also dipped 1-1/2 basis points to 0.430 percent and the yield on short-term 3-year note slid 1/2 basis point to -0.629 percent by 09:10 GMT.

According to Reuters, Germany is due to sell 5 billion Euros of the new notes, which carry a zero coupon, a day after one of the year's biggest sell-offs in benchmark Eurozone bonds.

The 10-year bund yields increased nearly seven basis points on Tuesday, as investors fretted that a new fiscal stimulus package unveiled in Japan could mark a shift away from monetary easing that could spill over into Europe, they added.

In terms of recent economic data, German service PMI dipped to 54.4 in July, lower than the market consensus of 54.6, from previous 54.6. On the other hand, the country’s composite PMI remained unchanged at 55.3 in July.

Moreover, the Eurozone retail sales for June were flat, matching expectations of 0.0 percent m/m, following the previous month's gain of 0.4 percent. The annual change also remained steady at 1.6 percent.

Investors will remain keen to focus on the upcoming economic data, highlighted by trade balance, Q2 GDP and consumer inflation.

Meanwhile, the German stock index DAX Index traded 0.26 percent lower at 10,118 by 09:10 GMT.