German bunds rally ahead of 10-year auction, investors eye December trade balance

The German government bunds rallied Wednesday ahead of the 10-year auctions scheduled for later in the day. Also, investors are eyeing the release of December trade balance data, scheduled for February 9.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 2 basis points to 0.34 percent, the long-term 30-year bond yields also plunged 2 basis points to 1.13 percent and the yield on short-term 2-year bond slipped 1 basis point to -0.78 percent by 08:40 GMT.

The German bunds have been closely following developments in oil markets because of their impact on inflation expectations. The International benchmark Brent futures moved lower 0.45 percent to USD54.80 and West Texas Intermediate (WTI) slumped 1.02 percent to USD51.64 by 08:50 GMT.

Weaker output in manufacturing and construction drove the biggest monthly drop in German industrial production in nearly eight years, data showed on Tuesday. Industrial output fell by 3.0 percent on the month, data from the Economy Ministry showed. This was much weaker than the consensus forecast in a Reuters poll for a rise of 0.3 percent and the steepest drop since January 2009.

Meanwhile, the German stock index DAX Index traded 0.02 percent higher at 11,551.20 by 08:40 GMT, while at 8:00GMT, the FxWirePro's Hourly Euro Strength Index remained highly bearish at -128.80 (a reading above +75 indicates a bullish trend, while that below -75 a bearish trend). For more details, visit http://www.fxwirepro.com/currencyindex