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French bond future pares losses with U.S. bonds

PARIS: French bonds clawed back earlier losses to settle little changed as a rally in the U.S. market pulled most European bond markets higher.

The June bond future settled at 121.94, down 0.02 basis points on the day. It fell as low as 121.56 earlier after a stronger-than-expected increase in French consumer prices in March rattled investors.

The spread between 10-year French bonds and Bunds did not recover from profit taking after the inflation report and was at 10 basis points at 1510 GMT, up from 7 basis points on Thursday which was the lowest it's been for two years.

Economists said the 0.6/0.7 percent rise in consumer prices was due to a number of special factors and was not too worrying yet, given the weakness elsewhere in the economy.

Nevertheless, PIBOR contracts suffered as traders said the inflation report made it less likely the Bank of France would have room to trim rates without another cut from Germany.

The June contract touched a contract high of 95.91 before slipping as low as 95.81. The rebound in U.S, markets boosted the contract and it settled at 95.86, down three basis points.-Reuter