German bunds trade narrowly mixed ahead of US employment report

The German bunds traded narrowly mixed on Friday as investors awaited the United States employment report for July in an attempt to estimate the Fed's most likely step. The yield on the benchmark 10-year bond rose 1 basis point to -0.090 percent and the yield on short-term 3-year note slid 1 basis point to -0.616 percent by 09:30 GMT.

The July Labour Department employment situation report will be released on 5 August at 12:30 GMT. We foresee that the non-farm payrolls will increase +180k in July, as compared to the +287k reading seen in June, alongside no change in the unemployment rate of 4.9 percent.

On Thursday, the Bundesbank boss and ECB governing council's Jens Weidmann in an interview said that there is a possibility of adjusting bond-buying programme and allowing special conditions or focusing more on highly indebted countries would further blur the boundaries of monetary and fiscal policy.

Also, he said that this could raise questions about ECB independence and also increase pressure to keep interest rates low if highly indebted countries could not withstand a rate rise. Increasingly buying bonds from countries with high debt or bad credit rating would distance Germany from core mandate, he added.

Lastly, markets will also remain keen to focus on the upcoming economic data, highlighted by trade balance, Q2 GDP and consumer inflation.

Meanwhile, the German stock index DAX Index traded 0.16 percent higher at 10,244 by 09:40 GMT.