German bunds tumble as crude hits 5-month high

The German bunds slumped on Thursday as investors cooled on safe-haven assets amid gains in riskier assets including oil and stocks. A recovery in oil prices has helped shore up concerns about a slowdown in the global economy and the outlook for inflation, sparking a rally in world equity markets. The yield on the benchmark 10-year, which moves inversely to its price, moved higher 33.33 pct to 0.200 pct and 3-year bonds yield jumped 3.14 pct to -0.484 pct by 0820 GMT.

The German government bonds have been closely following developments in oil markets because of their impact on inflation expectations and stock market sentiments. Today, Crude oil prices jumped to 5-month high as Energy Information Administration's (EIA) showed that crude stock rose lower than the market expectation last week. The crude inventories rose 2.1 million barrels, from prior build of +6.6 million barrels for the week ending 15 April. This came alongside a decreases seen in gasoline inventories of -0.1million barrel, from prior -4.2 million barrel and distillate inventories of -3.6 million barrel, as compared to a build of +0.5 million barrel seen prior. Moreover, Market speculation that Petroleum Exporting Countries (OPEC) and Russia will meet in Moscow next month to again strike a deal on oil output freeze, boosted crude oil investors confidence. But, Russian Energy Minister Alexander Novak denied about any such meeting happening in Russia in May.

On Sunday, the negotiations between Petroleum Exporting Countries (OPEC) and Russia failed to reach an agreement in the Doha round of talks to strike a deal on oil output freeze. The International benchmark for crude oil prices, Brent futures rose 0.17 pct to $45.85, while West Texas Intermediate crude oil jumped 0.20 pct to $44.27 by 0820 GMT.

Yesterday, the German March Producer Price Index stood flat at 0 pct, against market expectation of +0.2 pct, from down 0.5 pct in February. Energy prices were a big contributor, down 9.2 pct as compared to March last year, with prices of intermediate goods fell 2.3 pct and price of non-durable goods 0.3 pct lower.

Lastly, the investors will now focus on the ECB governing council meeting on Thursday, which is expected to culminate in the decision to leave policy unchanged.

Meanwhile, the German stock index DAX Index rose 0.24 pct at 10,447.50 by 0820 GMT.