German bunds jump following lower-than-expected March manufacturing PMI

The German bunds jumped during European session Friday after the country’s manufacturing PMI for the month of March came in lower than market expectations. This morning’s European dataflow has added new downwards pressure to yields.

The 10-year Bund yield has fallen 3bps and is now approaching zero, and the euro has weakened, after the flash euro area PMIs significantly disappointed expectations, suggesting in particular that the woes in the manufacturing sector have deepened.

The German 10-year bond yields, which move inversely to its price, slumped nearly 3-1/2 basis points to 0.006 percent, the yield on 30-year note plunged nearly 6 basis points to 0.624 percent and the yield on short-term 2-year traded tad lower at -0.553 percent by 10:10GMT.

But sterling (up 1½ cents from yesterday’s trough to above $1.310) is stronger following last night’s decision by EU leaders to extend the Article 50 deadline and thus avoid a no-deal Brexit next week.

The agreement, which keeps alive all possible eventual scenarios for Brexit (including a softer Brexit or no Brexit at all), offers a pair of new deadlines, conditional on events next week in the House of Commons.

Germany’s manufacturing PMI for the month of March, released by IHS Markit, registered 44.7 in March, down from 47.6 in February and its lowest reading in over six-and-half years. The index has now fallen in 14 of the past 15 months, down from a record high of 63.3 at the end of 2017, with each of the index’s sub-components imparting a negative influence since the previous survey.

Meanwhile, the German DAX remained 0.55 percent lower at 11,485.68 by 10:15GMT, while at 10:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at -40.76 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex