German bunds plunge despite lower-than-expected March services PMI, retail sales

The German bunds plunged Thursday after investors have largely shrugged-off the country’s lower-than-expected services PMI for the month of March and retail sales. Also, Germany’s industrial production for the month of February will add detailed direction to the debt market.

The German 10-year bond yields, which move inversely to its price, jumped nearly 3-1/2 basis points to 0.52 percent, the yield on 30-year note surged 4 basis points to 1.19 percent and the yield on short-term 2-year traded nearly 1-1/2 basis points higher at -0.57 percent by 10:04GMT.

The seasonally adjusted final IHS Markit Germany Services PMI Business Activity Index fell for the second straight month in March to 53.9, down from 55.3 in February and its lowest reading since last August. Nevertheless, thanks to a strong showing in the opening month of the year, when the headline PMI peaked at a near seven-year high, average growth in the first quarter was the greatest since Q3 2014.

Further, the slower increase services business activity in March coincided with a softening of manufacturing production growth to a 15-month low. As such, the final IHS Markit Germany Composite Output Index fell from 57.6 in February to 55.1, its lowest reading since July last year.

Lastly, the country’s monthly retail sales unexpectedly declined in February, data showed on Tuesday, and the third monthly fall in a row signalled that private consumption may remain weak in early 2018 after failing to contribute to growth in the fourth quarter.

Meanwhile, the German DAX jumped nearly 2 percent to 12,170.14 by 10:05GMT, while at 10:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 16.12 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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