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The French bonds slumped on Friday after reading stronger-than-expected first quarter Gross Domestic Product (GDP) figure. Also firm crude prices drove-out investors from safe-haven assets. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, moved higher 1.54 pct to 0.610 pct and the yield on the 2-year Treasury bond jumped 1.40 pct to -0.423 pct by 0800 GMT.
The Eurozone second largest economy 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, 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 French bonds have been closely following developments in oil markets because of their impact on inflation expectations. 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 0.40 pct to $47.96 and West Texas Intermediate (WTI) climbed 0.48 pct to $46.25 by 0730 GMT.
"The market is coming into better balance and we maintain the view that the current oversupply will flip into undersupply in 2H and global spare capacity is now 2 million barrels per day, or about 2 pct of global demand. This is a precariously low level," said investment bank Jefferies to Reuters.
Meanwhile, the benchmark French stock index (CAC 40) fell 1.45 pct to 4,435.8 by 0800 GMT.
