German bunds trade lower on rising Fed rate hike bets

The German bund yields traded between 0.01 percent to 0.05 percent mark Wednesday, but we expect them to rise and trade around 0.06 percent to 0.10 percent range as and when Treasury yields make their next move higher.

And the latter will be the path of least resistance, assuming Donald Trump loses the U.S. presidential election and Fed commentary and data continue to support a rate hike.

The yield on the benchmark 10-year bond, which moves inversely to its price, rose 2 basis points to 0.046 percent, the yield on long-term 30-year note also climbed 1-1/2 basis points to 0.665 percent and the yield on short-term 3-year bond also bounced 1-1/2 basis points to -0.638 percent by 08:50 GMT.

On Tuesday, the Munich-based Ifo institute’s business climate index climbed to 110.5 from 109.5 in September. Ifo’s measure of current economic conditions rose to 115 from 114.7, according to the report. A gauge of expectations improved to 106.1 from 104.5.

On Monday, Germany’s activity sector output rebounded during the month of October, following solid co-operation from private sector output, with the country’s composite Purchasing Managers’ Index (PMI) touching a 3-month high during the period.

Flash Germany PMI Composite Output Index rose to 55.1 in October, from 52.8 in September. Also, lash flash services PMI Activity Index jumped to 54.1 this month, from 50.9 in September, while the flash index for the country’s manufacturing sector rose to 55.1 in October, a33-month high, from 54.3 in the previous month; flash Germany manufacturing Output Index modestly rose to 56.9, compared to 56.4 in September, data released by HIS Markit showed Monday.

Meanwhile, the German stock index DAX Index traded 0.70 percent lower at 10,683 by 08:50 GMT.