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German bunds gain as investors wary ahead of consumer inflation data

The German bunds gained Tuesday as investors remained cautious ahead of August consumer inflation data. Also, bonds prices rebounded on upswing in investor demand, following a market selloff on Friday after the US Federal Reserve Chair Janet Yellen commented that the case for interest rate increase has strengthened in the coming months.

The yield on the benchmark 10-year bond fell 2-1/2 basis points to -0.077 percent, the yield on long-term 30-year note dipped 1-1/2 basis points to 0.452 percent and the yield on short-term 2-year bond remained steady at -0.615 percent by 09:30 GMT.

At the Jackson Hole Symposium, Yellen said that the FOMC continues to anticipate that gradual increases in the federal funds rate will be appropriate over time to achieve and sustain employment and inflation near our statutory objectives.

She further added that in light of the continued solid performance of the labour market and the Fed’s outlook for economic activity and inflation the case for an increase in the federal funds rate has strengthened in recent months. However, Yellen furthered that of course, the Fed’s decisions always depend on the degree to which incoming data continues to confirm the Committee's outlook.

Moreover, the German bonds have been closely following developments in oil markets because of their impact on inflation expectations. Crude oil prices rebound as the US dollar backed off a two-week high hit the day before. The International benchmark Brent futures rose 0.75 percent to $49.80 and West Texas Intermediate (WTI) jumped 0.96 percent to $47.43 by 09:30 GMT.

Lastly, investors will remain keen to focus on the upcoming economic data, highlighted by CPI, retail sales, unemployment and manufacturing PMI.

Meanwhile, the German stock index DAX Index traded 1.03 percent higher at 10,653 by 09:30 GMT.

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