German government bonds trading lower Tuesday following release of much stronger than expected German ZEW business sentiment survey. Mar Bund futures opened higher on a risk-aversion bid after Moody’s late yesterday downgraded six eurozone countries and as concerns grow over Greece’s PSI deal. However, Bunds then pared gains as markets realised that the downgrades by Moody’s take most countries in line with other rating agencies, with the exception of Spain. Bunds then came under pressure after German ZEW data, were the economic sentiment indicator jumped 27 points to a ten-month high of +5.4, the first positive reading since last May and much stronger than MNI’s median estimate of -13.8. The current conditions assessment rose 11.9 points to +40.3 vs MNI median estimate of +30.3. In addition, risk-appetite improved as Italian yield spreads reversed earlier widening in the wake of Moody’s downgrade move following strong BTP auction results. However, Spain is licking wounds after Moody’s 2 notch downgrade to A3 and negative outlook, and comes after mixed 12-/18-month T-bill auctions.
EasyForexNews Research Team