German bunds jump as investors shrug-off better-than-expected employment data; focus on 5-year auction

The German bunds jumped Wednesday as investors shrugged-off the better-than-expected employment data for the month of January. Investors will now focus on the country’s 5-year auction, scheduled for later in the day for further direction in the debt market.

The German 10-year bond yields, which move inversely to its price, slipped 1-1/2 basis points to 0.66 percent, the yield on 30-year note plunged nearly 4 basis points to 1.32 percent and the yield on short-term 2-year traded nearly 1 basis point lower at -0.53 percent by 09:35GMT.

Germany's unemployment rate dropped marginally in December, data from Destatis showed Wednesday. The jobless rate fell slightly to adjusted 3.6 percent from 3.7 percent in November. Meanwhile, on an unadjusted basis, the unemployment rate rose to 3.5 percent from 3.4 percent a month ago.

According to labor force survey, there were 1.58 million unemployed in December. It was down by around 13,000 from the previous month. At the same time, the number of persons in employment increased by 67,000, or 0.2 percent from the previous month in December.

Overall, having taken these numbers into account, a drop of 0.2ppt in headline CPI to 1.2 percent y/y is expected to be seen. While core CPI is expected to remain at 0.9 percent y/y for a fourth consecutive month, the uncertainty about how energy inflation will pan out is particularly high, Daiwa Capital Markets reported.

Beyond the inflation data, Germany’s retail sales figures for December this morning also surprised significantly on the downside with a drop of 1.9 percent m/m reversing the rise the previous month. That left sales down 1.9 percent y/y, and also down 0.1 percent 3m/3m, suggesting that consumer spending remained surprisingly subdued in the final quarter of last year.

Meanwhile, the German DAX slipped 0.39 percent to 13,250.50 by 09:40 GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -10.23 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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