The German bunds rallied on Friday as investors pour into safe-haven assets after consumer inflation continue to decline in April amid losses in riskier assets including stocks and oil. The yield on the benchmark 10-year bonds, which moves inversely to its price fell 2bps to 0.138 pct by 0700 GMT.
The Germany Consumer Price Index (CPI) declined 0.4 pct in April, trending in the line of consensus, from down 0.2 pct in March. Moreover, the German bonds have been closely following developments in oil markets because of their impact on inflation and equities expectations. Today, the crude oil prices fell in early trading on Friday as a stronger USD weighed and Russia warned that a global crude supply overhang could last into next year. In Canada, crude production outages from oil sand fields following forced closures due to wildfires still stood around 1 million bpd as of Wednesday, although operators said they were gradually ramping up output. The International benchmark Brent futures fell 0.96 pct to $47.63 and West Texas Intermediate (WTI) tumbled 1.11 pct to $46.18 by 0700 GMT.
On Tuesday, the German industrial production tumbled 1.3 pct m/m in March, against markets expectation of 0.2 pct fall, from down 0.7 pct (previous revised down from 0.5). On the contrary, economic ministry said that Q1 overall industry output rises 1.8 pct due to strong hikes in construction and capital goods. He further added that industry has overcome weak phase of H2 2015 and economic trend in the sector pointing upward. On the other hand, Germany trade surplus widened to EUR 26 billion, against market consensus of EUR 20.6 billion, from EUR 20.2 billion (previous revised down from EUR 20.3 billion). In addition, exports rose 1.9 pct m/m, estimates were for zero growth, from prior 1.35 pct and imports fell 2.3 pct m/m , consensus was for 0.3 fall, from up 0.1% (previous revised down from +0.4 pct). Yesterday, the 10-year German yield has dropped to 0.108 pct (the lowest level since April).
On the other hand, investors did not react to the higher Q1 GDP figure, which rose 0.7 pct, higher than the market consensus of 0.6 pct rise, from 0.3 pct in the last quarter of 2015. Meanwhile, the German stock index DAX Index fell 0.85 pct at 9,769 on tumbling crude prices by 0700 GMT.
The material has been provided by InstaForex Company – www.instaforex.com