German bund yields plunge ahead of September consumer price inflation data, ECB President Draghi’s speech

The German bund yields plunged during European session Thursday ahead of European Central Bank (ECB) President Mario Draghi’s speech, scheduled to be delivered today by 13:30GMT and the country’s consumer price inflation (CPI) data for the month of September, also due to be released today by 12:00GMT for further direction in the debt market.

The German 10-year bond yields, which move inversely to its price, slumped 4-1/2 basis points to 0.489 percent, the yield on 30-year note also plunged nearly 4-1/2 basis points to 1.105 percent and the yield on short-term 2-year remained 2-1/2 basis points lower at -0.538 percent by 08:55GMT.

German headline GfK consumer sentiment indicator bucked the gradual downward trend seen since April and rose 0.1pt to 10.6, only 0.4pt lower than the series high reached in February. The details were not all positive, however. Expectations for both the economy and personal income improved, but while the index for the latter was at the highest level since August 2017, the former merely recovered some of the recent months’ losses and was still significantly below the levels seen at the start of the year.

Further, the survey measure of consumer willingness to make purchases declined to the weakest in around 1-1/2 years. So, with the global economic outlook having clouded this year, despite the very tight labour market and some evidence of higher wage growth, German consumers appear to remain cautious – not particularly good news for the outlook for household consumption growth in Germany and the euro area as a whole.

Lastly, ahead of tomorrow’s flash euro area figures, the first guide to inflation in September comes later today with the release of the preliminary German estimates. In particular, on the harmonised EU measure, headline German CPI inflation is expected to remain unchanged at 1.9 percent y/y. Other new data due today include the ECB’s August bank lending figures.

Meanwhile, the German DAX remained 0.72 percent lower at 12,296.40 by 09:05GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -32.97 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex