European bonds sag as economies escape deflation fear

The European bond prices edged lower on Thursday after reading firm March Eurozone consumer price figures. Also, Eurozone bonds prices recline after overblown week of bond issuances. The benchmark German 10-year bonds yield, which is inversely proportional to bond price rose 9.49 pct to 0.150 pct, French 10-year bunds yield jumped 3.72 pct to 0.495 pct, Italian equivalents climbed 1.69 pct to 1.331 pct, Netherlands 10-year bonds yield inched higher 4.25 pct to 0.368 pct and Spanish 10-year bonds yield fell 1.22 pct to 1.490 pct by 1120 GMT.

On monthly basis, Eurozone prices were up 1.2 pct (still way below the European Central bank 2 pct target), increased in the line of market expectation, as compared to 0.2 pct in February. On annually basis, CPI stood flat at 0 pct, from down 0.1 pct in February and core-CPI grew 1 pct y/y.

The Germany, Netherlands, Italy and France have sold long-term bonds, putting higher pressure on long-dated yields and pushing up 10-year yields. Moreover, some investors switched into longer maturities for handsome returns. Moreover, another around of auction is expected to be held on May 12.

The German bunds have been closely following developments in oil markets because of their impact on inflation expectations. The crude oil futures are trading lower around $44.00, down from $44.50 in the earlier session as Iran’s oil minister said that he will not attend the Doha oil talks at the weekend but an Iranian representative will be there, underscoring the growing mixed views that key oil producers could agree on a production freeze this Sunday. The International benchmark Brent futures fell 0.27 pct to $44.05 and West Texas Intermediate (WTI) tumbled 0.55 pct to $41.53 by 1040 GMT.

Meanwhile, the International benchmark for crude oil prices, Brent futures fell 0.92 pct to $44.27, while West Texas Intermediate crude oil dipped 1.45 pct to $41.56 by 1140 GMT.