German bund yields plunge following lower-than-expected April retail sales data; eyes on May CPI

The German bund yields plunged during European trading session Friday following a lower-than-expected reading of the country’s retail sales for the month of April, while investors continue to focus on the consumer price inflation (CPI) data for the month of May, scheduled to be released today shortly, for further direction in the debt market.

The German 10-year bond yields, which move inversely to its price, slumped 3-1/2 basis points to -0.206 percent, the yield on 30-year note plunged 5 basis points to 0.429 percent and the yield on short-term 2-year traded 2-1/2 basis points lower at -0.668 percent by 11:00GMT.

Attention in the euro area this morning was on the latest German retail sales figures for April, for insight into the pace of consumption growth at the start of the second quarter. And while the headline year-on-year figure was impressive, the 4 percent increase was largely boosted by the timing of Easter this year. Indeed, the underlying detail was much weaker than expected in April, with sales down 2 percent on the month, the most since December, Daiwa Capital Markets reported.

While German retail sales are often revised in due course and April’s weakness represents the first monthly decline so far this year, against the backdrop of weakening consumer confidence, today’s release further supports our view that the surge in household consumption in the first quarter of the year was exaggerated by temporary factors, with a slowdown in spending on the cards in Q2, the report added.

Meanwhile, the German DAX traded nearly 2 percent lower at 11,685.86 by 11:05GMT, while at 11:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 11.29 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex