German government bonds trading higher Wednesday following weaker than expected European flash PMI data and gains in UK Gilts after dovish Bank of England minutes. Bunds opened lower ahead of German 2-year Schatz supply, with the benchmark 10-year Bund yield finding support ahead of the key 2.00% level as markets grow cautious over the full implementation of Greece’s second bailout deal, with press reports continuing to point to problems for both the PSI deal and for the actions of the Greek government. Prices continued to squeeze higher following release of weaker than expected European flash PMI data. The flash composite PMI came in at 49.7 in Feb vs 50.4 in Jan. Traders reported stop-loss buying, triggered by strong gains in UK Gilts following release of dovish BoE minutes, which showed 2 MPC members — Miles & Posen voting for a bigger than stg50bn boost to asset purchases. Also underpinning Bunds are wider EMU peripheral spreads, with Greece 10-year spread 14bps wider at +3506bps after Fitch downgraded Greece’s long-term rating to ‘C’ from ‘CCC’. Portugal is 10bps wider at +1190bps.
EasyForexNews Research Team