German bunds flat on soft Chinese economic data, crude rallies

The German bunds traded nearly flat on Monday after soft Chinese data pointed to a moderation in the world's second largest economy. Also, rallying crude oil prices drove-out investors from safe-haven buying. Moreover, bund prices are likely to be ruled by the movements in the crude oil market. The yield on the benchmark 10-year bonds, which moves inversely to its price stood unchanged at 0.125 pct and the yield on the 2-year bonds remained steady -0.508 pct by 0925 GMT.

The China retail sales rose 10.1 pct y/y in April, less than market estimates of 10.6 pct y/y and fixed asset investment increased by 10.5 pct y/y in January-April, also missed estimates for 11.0 pct y/y. Similarly, April Industrial Production climbed 6.0 pct y/y, lower than the market consensus of 6.5 pct y/y. This raised worries over the strength of a rebound in the world's second-largest economy.

On the other hand, The German bonds have been closely following developments in oil markets because of their impact on inflation expectations. Today, the crude oil prices jumped more than 1 pct after long-time bear Goldman Sachs said the market had ended almost 2-years of oversupply following global oil disruptions and flipped to a deficit. Reuters in its recent report said that supply disruptions from Nigeria, Venezuela, the United States and China triggered a U-turn in the oil outlook of Goldman Sachs, which long warned of overflowing storage and another looming crash in prices. Venezuela's oil production has already fallen by at least 188,000 bpd since the start of the year as PDVSA struggles to make the investment needed to keep output steady. In the United States, crude production has fallen to 8.8 million bpd, 8.4 percent below 2015 peaks as the sector suffers a wave of bankruptcies. And in China, output fell 5.6 percent to 4.04 million bpd in April, compared with the same time last year. The International benchmark Brent futures rose 1.74 pct to $48.66 and West Texas Intermediate (WTI) jumped 1.69 pct to $46.99 by 0925 GMT.

Meanwhile, the volumes were expected to be thin with the German market closed for a public holiday.