German bunds tad lower after January trade balance tops market estimates; shrug-off lower-than-expected industrial production

The German bunds remained tad lower during early European session Friday after the country’s trade balance for the month of January topped market expectations, while the industrial production missed consensus estimates, lending range-bound trading to the debt market.

The German 10-year bond yields, which move inversely to its price, rose 1 basis point to 0.64 percent, the yield on 30-year note also edged 1 basis point higher to 1.28 percent and the yield on short-term 2-year hovered around -0.55 percent by 08:55GMT.

The latest German trade data, also released this morning, saw the trade surplus unchanged in January at EUR21.3 billion, bang in line with its six-month average. Both exports and imports fell by around 1/2 percent m/m, but that likely reflected payback for recent strength. Indeed, the increases on a three-month basis of 3.6 percent and 3.7 percent were particularly strong, representing respectively the highest and the second highest readings since mid-2011.

Industrial production fell slightly in January compared with the previous month. In manufacturing, however, it has risen. Although the strong drop in new orders reported yesterday suggests that the momentum in the coming months is likely to be somewhat lower than in the second half of last year, the industry is likely to continue to boost the economy.

German IP figures, released this morning, showed a small decline of 0.1 percent m/m in January. The decline was driven by declines in energy and construction output of 3.3 percent m/m and 2.2 percent m/m respectively, while manufacturing output rose by 0.6 percent m/m, reversing a drop of a similar magnitude the previous month.

Looking through the monthly volatility, however, total IP was up by a solid 1.5 percent 3m/3m, the strongest such rate since last June, despite the fact that both energy and construction sector output declined by around 1.0 percent on this basis.

Meanwhile, the German DAX slipped 0.23 percent to 12,327.11 by 08:55GMT, while at 08:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -64.82 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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