German bunds tad lower after January consumer price inflation remains unchanged

The German bunds remained tad lower during European session Wednesday after the country’s consumer price inflation (CPI) remained unchanged during the month of January, meeting market expectations as well.

Now, Investors will keep an eye over the Eurozone’s CPI data for the month of December, scheduled to be released on January 17 by 10:00GMT for further direction in the debt market.

The German 10-year bond yields, which move inversely to its price, rose nearly 1 basis point to 0.212 percent, the yield on 30-year note remained tad higher at 0.828 percent and the yield on short-term 2-year traded flat at -0.615 percent by 08:40GMT.

The final German inflation data for December, released early today confirmed the preliminary estimate of 1.7 percent y/y (on the EU-harmonised measure), the weakest pace in eight months and 0.5ppt lower compared to November. The decline was accounted for mainly by energy prices, in particular those of heating oil and motor fuels which saw prices dropping by 16.7 percent m/m and 6.4 percent m/m respectively.

This downward pressure on the headline rate is likely to have persisted into this month despite the fact that oil prices seem to have stabilised. Going forward, we would expect that German inflation will ease further this month, likely to 1.5 percent y/y. And so having last year recorded full-year inflation of 1.9 percent, a level consistent with the ECB target, Germany is likely to see weaker inflation this year.

Meanwhile, the German DAX rose 0.13 percent to 10,902.76 by 09:50GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained highly bearish at -123.24 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex