The German 10-year bond yield fell to new low of -0.19 percent on Wednesday as investors poured into safe-haven instruments amid losses in riskier assets including crude oil and stocks.
Also, investors were cautious ahead of the FOMC June meeting minutes, will be published Wednesday, 6 July at 18:00 GMT. Markets will likely pay close attention to this release in an attempt to estimate the Fed's likely next step.
The yield on the benchmark 10-year bond fell nearly 1 basis point to -0.185 percent, yield on super-long 30-year bonds dipped more than 2-1/2 basis points to 0.321 percent and the yield on 20-year note slid 2 basis points to 0.153 percent by 08:25 GMT.
The German factory orders remained flat (zero percent) in May, against market consensus of 1 percent increase, from prior -2.0 percent and was revised to -1.9 percent. Similarly, German Markit construction PMI dipped to 50.4 in June, as compared to previous 52.7.
In global debt market, the 10-year Treasury note yield fell to record low of 1.34 percent, German 10-year bund yield dipped to -0.186 percent, UK gilt yield tumbled to 0.771 percent, the 10-year Australian bond yield fell to record low of 1.848 percent and yield on the 10-year bonds slid to record low of -0.277 percent.
On Tuesday, the drop in the July Eurozone Sentix index to 1.7 from 9.9 in Jun and against the consensus expectation of 5.0, reveals the extent to which the UK’s decision to leave the EU has started to adversely impacted investors’ sentiment in the Eurozone. The fall in the future expectations sub-index, as well as the equivalent for Germany, to 2.7 from 7.9 in Jun, in particular point towards a likely drop in the German headline ZEW investor sentiment indicator for July, from 19.2 in June, when the latter’s survey is published later in the month.
The ECB executive board member Sabine Lautenschlaeger said that she sees no reason for further rate cuts, considering the cost-benefit balance and that monetary policy is already extraordinarily expansive. Similarly, the Bundesbank President Jens Weidmann said that he sees no need for further policy easing in response to Brexit; monetary policy cannot address political uncertainty.
Importantly, our analysis concludes that Lautenschlaeger, along with her fellow German governing council member Weidmann, are probably the most hawkish policymakers at the ECB. Although it is a close call, we look for a final deposit rate cut in September, and can't rule it out coming as soon as 21 July if economic conditions deteriorate quickly.
Lastly, the German bunds have been closely following developments in oil markets because of their impact on inflation expectations. Today, crude oil fell below $50 a barrel as concern about a potential slowdown in economic growth that would weigh on demand trumped supply outages in Nigeria and other exporting nations. Also, Trade in one of Britain's largest property funds was suspended in one of the first signs of major financial stress following the country's vote to leave the EU. A flurry of data from China in coming weeks is expected to show weakness in trade and investment.
Meanwhile, the International benchmark Brent futures rose 0.31 percent to $48.11 and West Texas Intermediate (WTI) up 0.19 percent to $46.69, the German stock index DAX Index fell 0.91 percent at 9,446 by 08:25 GMT.
The material has been provided by InstaForex Company – www.instaforex.com