German bunds sag as rally in energy prices boost inflation expectations, investors shrug-off Italian referendum result

The German bunds slumped Monday as investors moved away from the safe-haven buying amid rising crude oil prices that lifted inflation expectations. Also, the market now looks ahead to the ECB monetary policy meeting, which is scheduled to take place on December 8.

The yield on the benchmark 10-year bond, which moves inversely to its price, rose 2 basis points to 0.30 percent, the yield on long-term 30-year note jumped 2-1/2 basis points to 0.97 percent and the yield on short-term 2-year bond inched 1/2 basis point to -0.73 percent by 09:10 GMT.

Crude oil prices climbed on fresh buying. The International benchmark Brent futures rose 0.73 percent to $54.86 (highest since July last year) and West Texas Intermediate (WTI) jumped 0.72 percent to $52.05 by 09:10 GMT.

Moreover, Italian Prime Minister Matteo Renzi has resigned after suffering a heavy defeat in a referendum over his plan to reform the constitution. In a late-night news conference, he said he took responsibility for the outcome and said the No camp must now make clear proposals, reported BBC news.

With most ballots counted, the No vote leads with 60 percent against 40 percent for Yes. The turnout was nearly 70 percent, in a vote that was seen as a chance to register discontent with the prime minister, they added.

In addition, the European Central Bank is expected to announce a six-month extension to its quantitative easing program next week, according to a majority of economists polled by Reuters, who also expect the bank to keep the size of its monthly asset purchases unchanged, Reuters reported

We also foresee that the European Central Bank is expected to keep its interest rate unchanged with maintaining the QE 80 billion euros a month as the Eurozone inflation hit a 31-month high in November, data showed on Wednesday.

Meanwhile, the German stock index DAX Index traded 1.48 percent higher at 10,668.50 by 09:10 GMT. While at 09:00 GMT, the FxWirePro's Hourly Euro Strength Index remained slightly bullish at +93.49 (higher than +75 represents bullish trend).