The European bond prices gained on Monday as investors pour into safe-haven assets amid losses in riskier assets including stocks and oil. The benchmark German 10-year bonds yield, which is inversely proportional to bond price fell 3.38 pct to 0.223 pct, French 10-year bunds yield dipped 1.16 pct to 0.561 pct, British equivalents tumbled 0.06 pct to 1.599 pct, Spanish 10-year bonds yield inched down 0.37 pct to 1.559 pct and Portuguese 10-year bonds yield fell 1 pct to 3.263 pct, Netherlands 10-year bonds yield inched lower 0.91 pct to 0.434 pct by 1005 GMT.
The European 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 tumbled after snapping last week’s 5-month gain on profit taking and report that Saudi Arabia could maintain its total crude output volume with the expansion of an oilfield, injecting fresh concerns about the global supply glut. The International benchmark for crude oil prices, Brent futures fell 1.15 pct to $44.55, while West Texas Intermediate crude oil dipped 1.37 pct to $43.13 by 1005 GMT.
On Friday, the European Central bank in its Survey of Professional Forecasters report lowered the Gross Domestic Product (GDP) for 2016 and 2017 to 1.5 pct and 1.6 pct, from 1.7 pct and 1.8 pct, respectively. Longer-term inflation expectations were unchanged at 1.8 pct and unemployment rate expectations have been revised downwards across all horizons and remained on a downward path.
On Thursday, the ECB Governing Council decided to keep its monetary policy stance unchanged. Additional easing measures were not discussed at the meeting, but the Governing Council left no doubt to act immediately by using all the instruments available within its mandate if new downside risks to the outlook for price stability should arise. Therefore, the easing bias remains unchanged in place. The key ECB interest rates remained on hold and are expected to stay at current or even lower levels for an extended period of time, and well past the horizon of the ECB's net asset purchases. As regards helicopter money, ECB President Draghi pointed out that this instrument is fraught with operational and legal difficulties. In response on the recent criticism on the current monetary policy stance the Governing Council unanimously stressed that the ECB is independent and is acting according to its mandate. With no hints that another review and reconsidering of the monetary policy stance at the June meeting is necessary, the introduction of additional easing measures in that meeting is unlikely.
The markets in the Germany will now focus on Consumer Price Index (CPI), Q1 GDP and March unemployment rate to be released on Friday (0900 GMT). The investors will also look forward to next week’s FOMC meeting on Wednesday, 27th April.
Meanwhile, the pan-European STOXX 600 index fell 0.42 pct and the euro-are blue-chip gauge, the STOXX 50, dipped 0.49 pct. The FTSE 100 Index is down 0.26 pct, the DAX trading 0.72 pct lower and the CAC-40 tumble 0.46 pct by 1005 GMT.
The material has been provided by InstaForex Company – www.instaforex.com