German government bonds are opening lower Friday following overnight gains in stocks. Volumes are seen as light given Tokyo holiday overnight in observance of the Emperor’s Birthday, and ahead of early close in London & NY for Christmas period. However, risks are on a reversal higher following comments from departing ECB member Bini Smaghi who said he would not exclude the option of quantitative easing in the EUROZONE should conditions require. “I do not understand the quasi-religious discussions about quantitative easing. It is appropriate if economic conditions justify it, in particular in countries facing a liquidity trap that may lead to deflation,” said Bini Smaghi in comments to the FT. Also seen underpinning Bunds is month-end duration extensions, where the BarCap Euro Treasury extension is 0.07 years and the iBoxx Euro sovereign index is estimated to extend by 0.06 years into January . Whilst this is regarded as a medium extension, it is seen as significant given it is above recent average for this time of the year and a fresh record.
EasyForexNews Research Team