European bonds are expected to slump on strong economic growth, rallying crude

The European bonds were trading mixed on Friday after receiving mixed bag of economic data. Although it is expected to decline as recent data showed that Euro zone economic growth quickened stronger-than-expected in the first quarter of 2016. Also, it is expected that rallying crude oil prices will pull back the bonds prices. The benchmark German 10-year bonds yield, which is inversely proportional to bond price rose 0.40 pct to 0.250 pct, French 10-year bunds yield jumped 2.05 pct to 0.611 pct, British equivalents tumbled 1.74 pct to 1.582 pct, Spanish 10-year bonds yield inched down 0.06 pct to 1.583 pct and Portuguese 10-year bonds yield rose 2.44 pct to 3.227 pct, Netherlands 10-year bonds yield inched lower 0.20 pct to 0.474 pct by 0955 GMT.

The Euro zone 2016 first quarter Gross Domestic product (GDP) rose 0.6 pct q/q, higher than the market anticipation of 0.4 pct q/q, from 0.3 pct in the last quarter of 2015. On annual basis, it rose 1.6 pct y/y, higher than the market consensus of 1.4 pct y/y, from prior 1.6 pct. Moreover, The France’s first quarter GDP climbed 0.5 pct q/q, higher than the market expectation of 0.4 pct q/q, from 0.3 pct in the last quarter of 2015. On annual basis, it rose 2.7 pct y/y, higher than the market expectation of 2.1 pct y/y, from prior 1.8 pct (revised to 1.6 pct). Similarly, the March consumer spending rose 0.2 pct m/m, against market expectation of -0.1, from up 0.5 pct in February.

On the other hand, the Euro zone preliminary April inflation decline 0.2 pct y/y, against market consensus of -0.1 pct, from prior zero. Similarly, the Germany March retail sales tumbled 1.1 pct m/m, against market expectation of 0.3 pct m/m rise, from down 0.4 pct in February. On annual basis, it rose tad 0.7 pct y/y, consensus was for 2.2 pct y/y, from prior 5.5 pct. The French consumer prices were weaker than expected in April, which rose 0.1 pct m/m, as compared to 0.8 pct m/m in March. On annual basis, it declined 0.2 pct, against market expectation of 0.1 pct fall, from prior down 0.1 pct. The milder than-anticipated consumer prices in April underscore the challenge confronting the European Central Bank to push inflation back up toward its 2% target. To accomplish that objective, the European Central Bank cut interest rates in March and extended its quantitative easing program.

The German bonds have been closely following developments in oil markets because of their impact on inflation expectations, which are well below the European Central Bank's target. Today, crude oil prices touched to 6-month high due to weak dollar and decline in United Sates output. Meanwhile, the International benchmark Brent futures rose 0.88 pct to $48.19 and West Texas Intermediate (WTI) climbed 0.91 pct to $46.45 by 0955 GMT.

Meanwhile, the pan-European STOXX 600 index down 0.96 pct and the euro-are blue-chip gauge, the STOXX 50, dipped 1.37 pct. The FTSE 100 Index is fell 0.65 pct, the DAX trading 1.11 pct lower and the CAC-40 tumbled 1.52 pct by 0955 GMT.