German bunds gain as investors focus on U.S. Presidential candidates’ debate

The German bunds gained Monday as investors turned heads from the European Central Bank’s monetary policy to the heating debate between the U.S. presidential candidates.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 2-1/2 basis points to -0.104 percent, the yield on long-term 30-year note dipped 3 basis points to 0.451 percent and the yield on short-term 2-year bond slid ½ basis point to -0.672 percent by 09:50 GMT.

According to Reuters, polls indicate a tightening race between Democrat Hillary Clinton and Republican Donald Trump in a vote shaping up as a major risk event for financial markets. Monday's presidential debate could push U.S. bond yields higher if the candidates hinted at more expenditure or tax cuts, which would increase the federal deficit and borrowing.

"Bond markets are likely to view any Trump gains in this debate as putting upward pressure on yields as his fiscal plans are more aggressive," said Martin Van Vliet, senior rates strategist at ING to Reuters.

Meanwhile, the German stock index DAX Index traded 1.54 percent lower at 10,464 by 09:50 GMT.