Moreover, the strengthening U.S. labor market and economy are fueling speculation of a Federal Reserve interest rate hike as soon as next month, fueling a diverging play between the Fed and European Central Bank monetary policies.

Additionally, the deflationary environment in Europe has also fueled speculation that the ECB could prolong its quantitative program. The ECB has enacted a 1.1 trillion euro program that will last until at least September 2016.

“The divergence trade is very much firmly in play,” Marc Ostwald, a strategist at ADM Investor Services International Ltd., told Bloomberg. Falling oil prices mean “the risk is lower for longer from the European Central Bank. The German economy hasn’t been exactly firing on all cylinders.”

DB German Bond Futures ETN

For more information on the fixed-income market, visit our bond ETFs category.

Max Chen contributed to this article.

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