Ten-year Bund yields should remain capped around 0.40%: Commerzbank

Quotes from Commerzbank Corporates & Markets:

-Regardless of greater risk appetite, the ten-year German benchmark yield yesterday marked a new all-time low at 0.28%, while seven-year Bunds were trading in negative territory for the first time.

-Moreover,the unusually strong over subscription of this week's five-year Bobl auction signals that demand for Bunds remains in place even amid record-low or negative yields.

-The same can be observed in the USA, with the more ambiguous statements from Fed Chair Yellen, who is keeping all options open regarding the first rate hike, which has pushed ten-year US Treasuries back below the important 2% threshold.

-We expect these dynamics to continue next week. However, this should primarily apply to the periphery as another positive US labour report seems to be on the cards next Friday and the latest strong support for Bunds from index buyers and reinvestments will also vanish at monthend.

-In view of the upcoming start of the ECB's bond buying programme, however, the scarcity effects resulting from QE will increasingly move into focus. Ten-year Bund yields should therefore remain capped around 0.40%.