May 26, 2016 / 7:41 AM / a year ago

German yields nudge up as oil prices clear $50 a barrel

LONDON, May 26 (Reuters) - Europe’s benchmark German bond yield nudged up on Thursday as oil prices cleared $50 for the first time in 2016 and raised the prospects of a future boost to the bloc’s near-zero inflation.

The tentative rise in yields, which followed a broad rally on Wednesday after Greece struck a debt deal with its international creditors, also came ahead of U.S. durable goods data that could provide further fuel for those calling for another rate rise in the world’s largest economy.

Dallas Federal Reserve Bank President Robert Kaplan on Wednesday said he would support raising interest rates in the “near future,” though a vote by Britain on whether to leave the European Union will weigh on any Fed rate decision in June.

German 10-year bond yields - which move inversely to prices - rose 1 basis point to 0.16 percent, while the futures shed 5 ticks to trade at 163.85.

“The next key test looms today with an above-consensus U.S. durable goods orders to provide further evidence that the underlying momentum of the U.S. economy justifies further hikes,” Commerzbank analyst Michael Leister said.

“Combined with the ongoing recovery in oil prices we therefore hold on to our tactical shorts in the Bund future.”

Brent oil futures climbed above $50 a barrel on Thursday for the first time for nearly seven months, boosted after U.S. government figures showed a sharper-than-expected drawdown in crude stocks last week.

Higher oil prices should help push up euro zone inflation - currently still in negative territory - later this year, and could see the ECB revise up its staff forecasts for consumer price growth at its meeting next Thursday, June 2.

The ECB slashed its inflation outlook in March based on estimates for Brent crude averaging about $35 a barrel this year. Since then, the price of oil has risen more than 20 percent.

An important market gauge for long-term inflation often cited by the ECB - the five-year, five-year forward rate - has climbed back up to 1.50 percent but is still well below the ECB’s inflation target of near 2 percent.

Economists polled Reuters were unanimous in expecting the ECB to hold policy steady at its meeting next Thursday, June 2, while a slim majority do not see the ECB easing again this year.

Turning to the U.S. data due this afternoon, economists polled by Reuters expect durable goods orders to have risen 0.5 percent in April, less than the 1.3 percent seen in March . Others, like Commerzbank, however are calling for a much higher increase of more than 2 percent. (Editing by Louise Ireland)

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