German bunds flat ahead of 2-year auction, August consumer inflation

The German bunds traded flat in European session Monday as investors wait to watch the 2-year auction, scheduled to be held on August 29 by 09:35GMT. Also, the country’s consumer price inflation for the month of August, due by August 30 will provide further direction to the debt market.

The benchmark German 10-year bond yields, which moves inversely to its price hovered around 0.38 percent, the yield on long-term 30-year note rose nearly 1 basis point to 1.15 percent and the yield on short-term 2-year traded flat at -0.74 percent by 09:40GMT.

The German economy is posting one sentiment high after the other with no industry lagging behind – this is the main upshot of the KfW SME barometer in July. Compared to the latest real growth of a good 2.4 percent annualized recorded in the first quarter of 2017, this extremely buoyant business climate seems exaggerated.

During the last peak in business climate seen in the winter semester 2010/2011, Germany posted annualized growth rates of 5.4 percent on average. Even if real growth is likely to have accelerated again in the second quarter, such growth rates would be out of reach. To some extent, the current euphoria might also be due to the relief felt when the political risk of a further destabilization of the euro area did not materialize.

Germany benefits not least from the brighter economic prospects of its European partners. If the positive signals from European politics translate into tangible results, the stronger growth might well be more than a flash in the pan.

Meanwhile, the German DAX traded 0.67 percent down at 12,086.25 by 09:40 GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained slightly bullish at 85.59 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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