German bunds rebound on BoJ’s unexpected move to curb yield growth

The German bunds gained Thursday after the Bank of Japan surprisingly announced its first special bond-buying operation to curb growth in bond yields.

The yield on the benchmark 10-year bond, which moves inversely to its price, fell 3 basis points to 0.277 percent, the yield on long-term 30-year note dipped 3-1/2 basis points to 0.880 percent and the yield on short-term 3-year bond slid 1 basis point to -0.636 percent by 09:40 GMT.

The German bonds have been closely following developments in the U.S. debt market. The United States benchmark 10-year Treasury yield tumbled 2-1/2 basis points to 2.19 percent.

According to Reuters, the BoJ offered to buy unlimited bonds for the first time under a revamped policy framework and its governor, Haruhiko Kuroda, said the central bank would not stand idly by as Japanese government bond (JGB) yields jump in line with moves in U.S. Treasuries.

The BOJ's decision serves notice to the markets that it is closely monitoring developments as it tries to keep borrowing costs low to spur stubbornly low inflation. In the euro zone, the European Central Bank also has a massive bond-buying programme in place to help spur growth and inflation, Reuters added.

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 0.15 percent lower at 10,646 by 09:40 GMT. While at 09:00 GMT, the FxWirePro's Hourly Euro Strength Index stood neutral at +19.82 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex