German bonds tad higher ahead of July industrial production, ECB policy decision

The German government bonds remained tad higher Wednesday as investors wait to watch the country’s industrial production for the month of July, scheduled to be released on September 7 by 06:00GMT, besides, the European Central Bank’s (ECB) monetary policy decision, due by 11:45GMT, which will add further direction to the debt market.

The German 10-year bond yields, which moves inversely to its price, rose 1 basis point to 0.35 percent, the yield on the 30-year note climbed 1/2 basis point to 1.12 percent and the yield on short-term 2-year traded a little over 1 basis point higher at -0.75 percent by 08:45GMT.

Today should be relatively quiet for new economic data from the euro area with only Italian retail sales figures for July (expected to slip back slightly on the month but to remain more than 1 percent higher than a year earlier) left to provide a mild distraction. The most notable euro area data of the day – German factory orders figures for July – have already been released, and surprised on the downside with a fall of 0.7 percent m/m in July, largely due to weaker domestic orders, contrasting with the expected increase.

The drop in German orders in the latest month hardly looks alarming, not least since it looks merely to have represented payback from consecutive increases of around 1 percent m/m in each of the previous two months – on a three-month basis, growth came in at 0.4 percent 3m/3m, down from the four-month high of 0.8 percent 3m/3m in June but close to the middle of the recent range. Most notably, on an annual basis, the rate of increase remained little changed at a very respectable 5.0 percent y/y, highlighting the strong recent demand for German manufactured items, with growth on this basis vigorous for consumer, capital and intermediate goods alike.

Meanwhile, the German DAX traded 0.18 percent lower at 12,101.50 by 09:15 GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -9.85 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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