The Euro zone government bonds traded mixed on Monday after data showed softer than expected US May employment, which dampened prospects for any near-term action from the US Federal Reserve on interest rates hike. Also, growing concerns over whether Britain will stay in the European Union pinned European bonds. On the other hand, firm crude oil prices drove-out investors from safe-haven buying. Moreover, investors await Federal Reserve Chair Janet Yellen's speech at 16:30GMT in an attempt to estimate the Fed's likely next step to raise the interest rate.
The benchmark German 10-year bonds yield, which moves inversely to its price hovered below 0.070 percent mark, French 10-year bunds yield rose 1 basis point to 0.435 percent, Irish 10-year bonds yield moved up 3 basis points to 0.768 percent, Italian equivalents inched higher 5 basis points to 1.383 percent, Netherlands 10-year bonds yield up 1/2 basis points to 0.294 percent, Portuguese 10-year bonds yield jumped 5 basis points to 3.228 percent, Spanish 10-year bonds yield climbed 4 basis points to 1.507 percent and British 10-year bonds yield fell 1-1/2 basis points to 1.265 percent by 10:15 GMT.
The US May Labor Department employment situation report revealed overall only +38k increase in non-farm payrolls, well below market expectations for a +160k increase, as compared to the revised +123k reading in April (previous was +160k). This comes alongside a considerable decrease in the unemployment rate to 4.7 percent, below expectations for a 4.9 percent result, down from 5.0 percent. Average hourly earnings increased +0.2 percent m/m, from revised +0.4 percent m/m reading seen in April, previous was +0.3 percent m/m.
Additionally, average weekly hours held unchanged at 34.4 in May. Overall, weaker net revisions were seen in March and April (net -59k revisions).
In addition, the Euro zone government bonds gained as the recent polls showed the outcome of the referendum is too close to call, raising the possibility that Britain might leave the EU after 43 years of membership in the bloc. According to the latest EU referendum poll by TNS, 43 percent would vote to leave and 41 percent supported to stay. On the other hand, ITV in its poll came in at 45 percent in favour of leaving and 41 percent to remain.
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 jumped more than 1 percent, supported by the softer dollar after last week's well-below-forecast US jobs report. The International benchmark Brent futures rose 1.13 percent to $50.21 and West Texas Intermediate (WTI) jumped 0.88 percent to $49.05 by 09:10 GMT.
Meanwhile, the pan-European STOXX 600 index was up 0.04 percent and the euro-area blue-chip gauge, the STOXX 50 dipped 0.10 percent. The FTSE 100 Index rose 0.92 percent, the DAX trading 0.04 percent higher and the CAC-40 ticked down 0.09 percent by 10:15 GMT.
The material has been provided by InstaForex Company – www.instaforex.com