German government bonds trading higher Thursday, amid 2-way flow, with the belly of the yield curve underperforming. Mar Bund futures opened higher amid increased geo-political tensions in the Middle-East and also the continued uncertainty surrounding Greece. Prices then eased on profit-taking ahead of German Ifo business sentiment survey on unsubstantiated market talk of a strong outcome following yesterday’s upbeat Belgian business confidence data, which has a strong correlation to German Ifo. Indeed, German Ifo Business sentiment came in strong at 109.6 in Feb vs MNI median of 108.8 and 108.3 in Jan. In addition, Italian Feb consumer confidence also came in strong and rose to 94.2 from 91.8 in Jan, when it had posted a 16-year low. Bunds then squeezed higher after the European Commission sharply reduced its forecasts for growth in the EU and the Eurozone for 2012. Mar Bunds then came under further pressure, which was related to heavy skew of put spread buying in Bund options. However, Mar Bunds then found intra-day support at 138.66 – the 61.8% of the day’s range.
EasyForexNews Research Team