Eurozone periphery bonds remain narrowly mixed ahead of benchmark German 5-year auction

The Eurozone periphery bonds traded narrowly mixed Monday as investors wait to watch the benchmark German 5-year auction, scheduled to be held on August 9 by 09:35GMT. Also, Germany’s consumer price led-inflation index (CPI) for the month of June, due on August 11 will provide further direction to the debt market.

The benchmark German 10-year bond yields, which moves inversely to its price, hovered around 0.48 percent, the French 10-year bond yields flat at 0.75 percent, Irish 10-year bond yields rose nearly 1/2 basis point to 0.77 percent, Italian down 1/2 basis point to 2.01 percent, Netherlands 10-year bond yields steady at 0.59 percent, Portuguese equivalents slumped 1-1/2 basis points to 2.85 percent and the Spanish 10-year yields traded nearly flat at 1.47 percent by 09:20GMT.

Focus in the euro area this week will be on national industrial production and trade reports for June, as well as final estimates of July inflation. First up were German IP data figures this morning, which fell well short of expectations. Indeed, contrasting with the expected modest increase, industrial output fell by more than 1 percent m/m in June, broadly reversing the increase in May. And the drop in manufacturing output was even steeper (-1.4 percent m/m), with notable weakness in production of intermediate, capital and consumer durable goods alike.

Nevertheless, this marked the first fall in industrial output so far this year. And over the second quarter as a whole, production was almost 2 percent q/q higher, the strongest growth for four years, supporting the view that GDP growth likely accelerated last quarter to 0.7 percent q/q, which would be the joint-strongest since Q213.

Italian and French IP figures will follow on Wednesday and Thursday respectively and are similarly expected to be consistent with positive growth in Q2. Wednesday will bring the latest Bank of France business sentiment survey, while German and French goods trade reports are also due tomorrow.

Finally, the end of the week will see the release of final inflation estimates for July from Germany, France and Spain, which are likely to confirm the flash estimates showing that German and French CPI moved sideways, while the equivalent EU-harmonised rate from Spain are expected to have edged slightly higher. On the supply-side, Germany will sell 5Y bonds on Wednesday.

Meanwhile, the pan-European STOXX 600 index fell 0.13 percent to 382.03, German DAX slipped 0.23 percent to 12,269.50, France’s CAC 40 rose 0.25 percent to 5,216.25 and the PSI20 Index traded 0.08 percent higher at 5,257.28 by 09:30 GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -35.47 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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