Spanish government bonds slump on strong Q1 GDP figure

The Spanish government bonds slumped on Friday after reading better-than-expected Q1 Gross Domestic Product (GDP) figure. The yield on the benchmark 10-year bonds, which moves inversely to its price, moved rose 1.26 pct to 1.604 pct and the yield on the 2-year bonds climbed 22.73 pct to -0.034 pct by 0730 GMT.

The Spanish 2016 first quarter GDP rose 0.8 pct q/q, higher than the market expectation of 0.7 pct q/q, from 0.8 pct in the last quarter of 2015. On annual basis, it rose 3.4 pct, higher than the investor’s anticipation of 3.2 pct, as compared to prior 3.5 pct.

On the other hand, it cannot be ignored that Spain confronting its second election in just 6-months after a last round of converses with structure a coalition government fizzled and growing unemployment rate.

The Spanish bonds have been closely following developments in oil markets because of their impact on inflation expectations. Today, crude oil prices tumbled after snapping to 2016 high on profit booking and a looming rise in Middle East output, on the other hand weak greenback and falling United Sates output are still offering support. 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.

Meanwhile, the Spanish stock index (IBEX 35) fell 1.3 pct to 9,147.5 by 0730 GMT.