LONDON: Euro zone bond yields fell on Friday after data showed modest and patchy third quarter growth in the currency bloc, keeping intact bets for more easing from the European Central Bank.
A preliminary estimate by the European Union's statistics office showed the euro zone economy expanded 0.2 percent quarter-on-quarter after Germany dodged recession and France beat market expectations.
Growth remained uneven in the 18-nation bloc. Italy -- the biggest economy on its periphery -- stayed in recession while Portugal grew 0.2 percent, below forecasts.
There was some relief in the market that the region avoided recession but the minimal recovery and confirmation of ultra-low inflation did little to cool expectations of more ECB stimulus.
"It's a tiny bit better but I can't really say it has led us into revising our view on anything. We're anticipating weak ECB forecasts in December and the the bigger backdrop of what's going on elsewhere remains fairly bearish on euro zone inflation and growth," said Lyn Graham-Taylor, a strategist at Rabobank.
"We're sticking with our March 2015 likely date (for ECB sovereign bond purchases)."
German 10-year yields slipped 1.5 basis points to 0.78 percent while French equivalents were down 2 bps at 1.14 percent. German yields have edged closer to a record low of 0.716 percent, hit last month as pressure mounted on the ECB to take more aggressive monetary measures to revive anaemic growth in the currency bloc.
Bets that the ECB will in coming months start buying government bonds with new money, a measure known as quantitative easing, firmed on Thursday after experts surveyed by the central bank lowered inflation forecasts.
"We still have this deflationary risk, and of course the ECB has outlined that they want to extend balance sheet to around three trillion (euros).
It's not like they're going to change that target just because of these GDP numbers," said Daniel Lenz, a strategist at DZ Bank.
Greek yields fell the most, though moves there are exaggerated by thin liquidity, down 13 bps at 8.06 percent after the economy posted three consecutive quarters of growth this year, emerging from its worst recession since World War Two.
Elsewhere, Italian and Spanish 10-year yields were 1-2 bps lower at 2.34 percent and 2.13 percent respectively.
Italy and Spain, the largest economies in the periphery and among the most indebted, would stand to benefit the most if the ECB buys sovereign bonds.
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