Hauke Siemssen, Interest Rate Strategist at Commerzbank Research, has stated that the pronounced weakness in the bond market is particularly evident in the absence of clear bearish factors. The data on Tuesday, which had a two-fold impact, is also unlikely to provide sustained relief.
The market is speculating on whether the Federal Reserve will cut interest rates quickly, leading to sell-offs in various maturities of US government bonds, resulting in a flattening yield curve.
With much of Europe in holiday mode, liquidity is expected to be thin, making even minor unexpected data releases likely to trigger considerable volatility.
The German ZEW Economic Sentiment Index is anticipated to remain weak, and while it’s not usually a primary market-driving factor, long-term German bonds might still benefit from it.
Meanwhile, a rebound in US retail sales data is expected.
