Eurozone periphery bonds rally ahead of ECB President Draghi’s speech; investors defy stronger German Ifo business index

The Eurozone periphery bonds rallied Monday as investors wait to watch the European Central Bank (ECB) President Mario Draghi’s speech later in the day. However, the market has largely shrugged off the benchmark Germany’s stronger Ifo business climate index, released today.

The benchmark German 10-year bond yields, which moves inversely to its price, traded tad lower at 0.25 percent, the French 10-year bond yields, also slipped nearly 1 basis point to 0.60 percent, Irish 10-year bond yield plunged also fell 1 basis point to 0.63 percent, Italian equivalent slumped 1-1/2 basis points to 1.89 percent, Netherlands 10-year bonds yield traded almost flat at 0.45 percent, Portuguese equivalents plummeted 1 basis point to 2.89 percent while the Spanish 10-year yields traded 1/2 basis point higher at 1.38 percent by 08:40 GMT.

With the EUR holding up well near its recent highs, markets will be listening to ECB President Draghi's opening address for their three-day forum in Portugal. Although, the highlight of the event will be a panel discussion with various central bank heads, including Carney, Poloz and Kuroda on Wednesday.

With the ECB still desperately seeking some underlying price pressures, perhaps most notable of the coming week’s releases will be the flash estimates of inflation in June, with the German numbers due on Thursday and the euro area and French figures due on Friday.  And Draghi looks set to be disappointed once again.

"Not least due to lower energy price inflation, we expect euro area headline CPI to fall for the second successive month to 1.2 percent y/y, from 1.4 percent y/y in May, but euro area core CPI to inch up 0.1ppt to 1.0 percent y/y," Daiwa Markets commented in its latest research report.

Meanwhile, the pan-European STOXX 600 index was up 0.76 percent at 390.69, German DAX rose 0.72 percent to 12,823.50, France’s CAC 40 jumped 1.07 percent to 5,321.30, and the PSI20 Index traded 0.88 percent higher at 5,245.38 by 09:10 GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index stood neutral at 64.14 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex