German bunds gain amid banking woes, crude oil prices slide

The German bunds gained Friday, following concern about the financial health of country’s biggest lender after insolvency fears plaguing Deutsche bank heated up, triggering market-wide risk aversion. Also, investors poured into safe-haven instruments amid losses in riskier assets including equities and crude oil.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 3-1/2 basis points to -0.152 percent, the yield on long-term 30-year note dipped 5 basis points to 0.397 percent and the yield on short-term 2-year bond slid 1-1/2 basis points to -0.700 percent by 09:20 GMT.

Deutsche Bank AG shares slid to a record in the U.S. as Bloomberg News reported that some hedge funds have reduced their exposure to the company. Fellow German lender Commerzbank AG said Thursday it would cut one in five of its employees and suspend dividend payments. Meanwhile, shares of Deutsche Bank fell 7 percent and rival German lender Commerzbank shares dipped 6.5 percent after announcing job cuts.

Moreover, the German bunds have been closely following developments in oil markets because of their impact on inflation expectations. Crude oil prices dropped as investors cashed in profit after relishing 7 percent of gain in the past two sessions after OPEC confirmed that the group has struck a deal to lower crude output at its policy meeting in November. The International benchmark Brent futures fell 1.45 percent to $49.09 and West Texas Intermediate (WTI) also tumbled 1.34 percent to $47.19 at 09:40 GMT.

In term of recent economic data, German retail sales declined 0.4 percent in August after adjusting for seasonal and calendar variations, data released by the German Statistics Agency Destatis showed Friday. This followed a downwardly-revised 0.5 percent gain for the previous month, which was originally reported as 1.7 percent.

However, on an annual basis, there was a 3.7 percent rise, while the annual increase for the first eight months of 2016 was 2.2 percent in real terms and 2.3 percent in nominal terms with prices broadly unchanged during the period.

Meanwhile, the German stock index DAX Index traded 1.17 percent lower at 10,284 by 9:40 GMT.