German government bonds are higher Thurs in line with global fixed income markets following rate cuts in Korea/Brazil, weak economic data in Australia and easing measures in Japan. Bunds also gained as Italy & Spain yield spreads reversed earlier tightening moves and stocks traded lower. Sep Bunds earlier put in 2-way flows, with move attributed to misinterpretation of the daily ECB liquidity data, where the deposits fell to E324.931bln vs E809bln on July 10; but c/a balance rose from E111.526bln to E539.786bln. The move comes following start of the new maintenance period and also the first day of the cut in the deposit rate to zero percent. Both the excess reserve at the current account and deposit at the deposit facility now receive zero percent. Bunds then squeezed higher as Italy 10Y spread reversed tightening despite decent 12-mth T-bill auction, with market putting in concession ahead of the mid-month auction tomorrow. In addition, Spain 10y yield spread also reversed earlier tightening on reports of domestic accounts selling, albeit in thin volume conditions, which exaggerated price move.
EasyForexNews Research Team