German bunds plunge despite lower-than-expected July manufacturing PMI; 10-year auction in focus

The German bunds plunged during European session Wednesday after investors have largely shrugged-off the country’s lower-than-expected manufacturing PMI for the month of July. Investors are awaiting the long-term 10-year auction, scheduled to be held today in some time, for further direction in the debt market.

The German 10-year bond yields, which move inversely to its price, slumped 2-1/2 basis points to 0.46 percent, the yield on 30-year note climbed 2 basis points to 1.10 percent and the yield on short-term 2-year traded nearly 1 basis point higher at -0.57 percent by 09:00GMT.

Germany’s headline IHS Markit/BME Germany Manufacturing PMI – a single-figure snapshot of the performance of the manufacturing economy – posted 56.9 in July, up from 55.9 in June. The start of the third quarter indicated a sharp improvement in operating conditions, with manufacturing growth regaining momentum.

With US and China reportedly willing to restart negotiations on their trade policies, and following a meeting between Juncker and Trump, where both sides agreed to start talks on facilitating trade flows between each other, it will be worth keeping an on how European manufacturers see their foreign demand evolving. The preliminary release showed that the new export orders manufacturing PMI fell to the lowest level in more than two years.

Meanwhile, the German DAX slipped 0.13 percent to 12,787.96 by 09:10GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 24.28 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex