German bunds plunge ahead of Eurozone October services PMI, September retail sales data

The German bunds plunged during European session Tuesday ahead of the eurozone’s services PMI for the month of October, scheduled to be released on November 6 by 09:00GMT and the September retail sales, also due for release on the same day by 10:00GMT for additional direction in the debt market.

The German 10-year bond yield, which move inversely to its price, jumped nearly 3 basis points to -0.320 percent, the yield on 30-year note surged nearly 4 basis points to 0.202 percent while the yield on short-term 2-year remained flat at -0.653 percent by 09:45GMT.

"Due to the events of the past month, we now see a no-deal Brexit in January as unlikely, and forecast a Brexit with a deal on 31 January next year. This shift has some important implications for our market estimates, beyond the GBP. Firstly, we believe the removal of a Brexit risk premium justifies an upward adjustment to our forecast for long-term interest rates in the eurozone, driven by a rise in German government bond yields. Secondly, the modestly improved outlook for eurozone growth as a result of a no-deal Brexit being avoided, suggests slightly more upside in the EUR/USD going forward," DNB Markets commented in its latest research report.

The yield on German 10-year government bonds has risen 40 basis points (bp) since the beginning of September. The first leg-up in German yields came after the release of the better-than expected August non-manufacturing ISM in early September, which lifted US 10-year yields by 10bp immediately after the release, and equivalent German yields by 8.5bp at the same time, the report added.

Meanwhile, the German DAX remained tad 0.13 percent higher at 13,153.96 by 09:50GMT.