German bunds plunge following weakness in U.S. Treasuries, Fed Dec rate hike probability jumps to 94 pct

The German bunds plunged Wednesday following weakness in the U.S. Treasuries as the probability of a December rate hike by the Federal Reserve jumped to 94 percent.

The yield on the benchmark 10-year bond, which moves inversely to its price, rose 2 basis points to 0.326 percent, the yield on long-term 30-year note jumped 2-1/2 basis points to 0.946 percent and the yield on short-term 3-year bond climbed 1/2 basis point to -0.582 percent by 09:10 GMT.

The German bonds have been closely following developments in the U.S. debt market. The United States benchmark 10-year Treasury yield bounced to 2.26 percent for the first time in 2016.

Also, a heavy sell-off in government bonds was supported by rising expectations that the U.S. President-elect Donald Trump's policies, such as fiscal expansion and protectionism on international trade, could support growth and inflation.

Last week, the United States Republican candidate Donald Trump pinned his victory against Democrat opponent Hillary Clinton in the 2016 presidential election. Investors again revised the outlook for US interest rates after Donald Trump's victory, with the probability of a December rate hike by the Federal Reserve going from as low as 30 percent to as high as 94 percent.

On Tuesday, Germany’s gross domestic product rose less-than-expected in the last quarter to a seasonally adjusted 0.2 percent, lower than the market consensus of 0.3 percent increase, from 0.4 percent in the preceding quarter.

Rising apprehension from the 'Brexit' negotiations and continued structural weaknesses plus upcoming elections in many Eurozone countries add to the downside risks for the German economy. The European Central Bank meets next month to review interest rates and its quantitative easing programme.

Investors remain keen to focus on the upcoming economic data and events, highlighted by Eurozone Q3 CPI, Eurozone CPI, German PPI followed by ECB President Mario Draghi and German Bundesbank President Jens Weidmann speech.

Meanwhile, the German stock index DAX Index traded 0.23 percent lower at 10,712 by 09:10 GMT. While at 09:25 GMT, the FxWirePro's Hourly Euro Strength Index stood neutral at 8.70 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex