Eurozone periphery bonds rally ahead of benchmark German CPI

The Eurozone periphery bonds rallied Thursday in a muted trading session that witnessed data of little economic significance. Also, the German consumer price inflation index, scheduled for release on July 28 is keenly awaited for further direction to the debt market.

The benchmark German 10-year bond yields, which moves inversely to its price, slumped 4 basis points to 0.52 percent, the French 10-year bond yields also plunged 4 basis points to 0.77 percent, Irish 10-year bond yields nose-dived 5-1/2 basis points to 0.82 percent, Italian down by nearly 5 basis points to 2.07 percent, Netherlands 10-year bond yields traded 4-1/2 basis points down at 0.63 percent, Portuguese equivalents slipped 3 basis points to 2.94 percent and the Spanish 10-year yields traded 4 basis points lower at 1.50 percent by 09:10GMT.

While yesterday saw French consumer confidence take a step back as various interest groups blanched at the Macron administration’s spending-cut proposals, and Italian sentiment inched only slightly higher in the latest month to remain well below the recent peaks, this morning’s release of the latest German consumer confidence survey suggested that household sentiment in the euro area’s largest member state continued to strengthen at the start of Q3, with the headline index rising for the fourth consecutive month to its highest level since October 2001.

The improvement principally reflected a further improvement in consumers’ overall assessment of the economic situation, which they assessed to be at the most favourable for three years. But while consumers’ income expectations reached the highest level since reunification, they signalled somewhat less willingness to buy durable goods, although the relevant index still remained close to the top of the recent range suggesting that consumer spending should continue to support German GDP growth this quarter.

Later this morning the latest euro area monetary data are due. With loans to households having risen in May at the fastest rate in eight years, the flow of net new loans to businesses also close to the top of the post-crisis range, and the latest ECB bank lending survey suggesting ongoing easing of credit conditions and increased loan demand including for fixed investment, expect today’s figures to show continued growth in lending supportive of the economic expansion.

Meanwhile, the pan-European STOXX 600 index slipped 0.08 percent to 382.43, German DAX fell 0.53 percent to 12,239.50, France’s CAC 40 rose 0.16 percent to 5,198.00 and the PSI20 Index traded 0.30 percent lower at 5,254.13 by 09:10 GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 71.58 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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