German government bonds are trading higher Monday with the benchmark 10-year Bund yield hitting fresh record low at 1.666% after weak eurozone PMI data and flight-to-quality buying amid weak stocks and political uncertainty in France and the Netherlands. The Dutch 10-year yield spread is holding steady at +71bps following earlier sharp widening on back of leverage account selling, according to traders. Elsewhere, France 10-year OAT yield spread is 3bps wider at +140bps versus +146bps earlier. Bunds also gained after weaker than expected April eurozone flash PMI and Italian consumer confidence data. In addition, European stocks traded under pressure with the Spanish IBEX down around 2.7% and extending its underperformance – hitting its lowest level since March 2009. Spain 10-year yields also briefly nudged above 6.00% before easing back lower after unconfirmed market talk heard that the ECB was checking prices in Spanish bonds, which was later dismissed. Spanish bonds also pressured by Bank of Spain Q1 GDP data, which fell 0.4% q/q versus -0.3% q/q in Q4, i.e. official recession territory.
EasyForexNews Research Team