LONDON Dec 16 German Bunds pared an early rise
on Monday after a survey showed euro zone private sector
activity surpassed expectations in December, against a backdrop
of investor caution ahead of the Federal Reserve's rate meeting
Bunds rose in early trade after separate surveys showed
private sector activity in France slowed unexpectedly in
December, while growth in activity in China's vast factory
sector slowed to a three-month low.
But similar surveys showing the euro zone's private sector
ending the year on a high dented appetite for safe-haven debt,
even though the data underlined the widening gap in performance
between the euro zone's two largest economies.
German Bund futures were down 5 ticks at 140.20. Other
highly-rated euro zone debt were also unchanged, with the
ten-year French bond yield flat at 2.25 percent.
Markit's preliminary composite Purchasing Managers' Index
(PMI) for Germany, which tracks growth in the manufacturing and
services sectors, stood at 55.2 in December, comfortably above
the 50 mark that separates growth from expansion.
"Certainly the Chinese PMI manufacturing flash survey was
disappointing. That put some pressure on Asian equities giving
Bunds a bit of a lift at the open. But the PMI manufacturing in
Germany surprised on the upside so that's taken any momentum out
of the Bund market," said Nick Stamenkovic, bond strategist at
RIA Capital Markets.
Ten-year German yields were flat at 1.84
percent, while two-year yields were steady at 0.23
percent, having recently underperformed as falling money market
liquidity weighs on the short-end of the German curve.
Ten-year German yields, however, were well within this
month's 1.70-1.89 percent range as investors played it safe
before the Fed's Dec. 17-18 meeting.
Even though the consensus is still for the Federal Reserve
to begin scaling back asset purchases in March, a slew of upbeat
U.S. data recently has increased speculation that tapering could
come as soon as this week.
"We think there is a case for a bit more cautious approach
going into the (Fed meeting)," Commerzbank strategist Rainer
Guntermann said, adding he expected tapering early next year.