German bunds slide after employment report looks promising in March; consumer price inflation closely eyed

The German bunds slid Thursday after the country’s employment report for the month of March, did not disappoint market expectations, thus weighing on asset prices. Investors are now eyeing the consumer price inflation (CPI) data, due by 12:00GMT will add detailed direction to the debt market.

The German 10-year bond yields, which move inversely to its price, rose nearly 1 basis point to 0.50 percent, the yield on 30-year note surged 1-1/2 basis points to 1.16 percent and the yield on short-term 3-year traded tad higher at -0.45 percent by 09:40GMT.

In the euro area, the focus today should be mainly in Germany where the latest inflation figures are due. The headline EU-harmonised measure of German inflation has been on a downward trend in recent months, and in February hit 1.2 percent y/y, the lowest rate in fifteen months. A leap to 1.6 percent y/y is expected in March, driven by one-off factors such as higher hotel and flight prices ahead of the Easter holidays.

Looking through that, the underlying trend in German inflation is highly likely to have remained subdued, despite the fact that the labour market continues to tighten. Indeed, today’s labour market figures are likely to show that claimant-count unemployment continues to fall, with the unemployment rate based on these dataset to edge lower to 5.3 percent, which would be a new post-reunification low.

Meanwhile, the German DAX slumped 1.12 percent to 11,839.23 by 09:40GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained neutral at 36.86 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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