Bunds made further gains Thursday as flash German inflation estimates for November undershot expectations, while the European Commission (EC) survey and bank lending data were consistent with soft eurozone gross domestic product growth in Q4, said Daiwa Capital Markets.

OATs outperformed as the French government appeared to make concessions to the opposition parties in an attempt to pass its budget, noted the bank.

The eurozone highlight on Friday will be the flash HICP inflation estimates for November, which are widely anticipated to rise for a second month due to higher energy prices. As a consequence, Daiwa expects headline inflation to edge up 0.2ppt to 2.2% year over year.

While the energy component is likely to be the main driver of November's rise, unfavorable base effects in non-energy industrial goods and services could also exert upward pressure on core inflation, which the bank forecasts to rise 0.1ppt to 2.8% year over year.

Separately, despite the pickup in consumer 12-month inflation expectations reported in Thursday's EC survey, the European Central Bank's consumer survey will likely suggest that medium-term inflation expectations remain well-anchored close to the 2% target.

Meanwhile, ahead of next week's aggregate eurozone retail sales data for October, Friday's releases from the member states -- Germany, Spain and France -- will likely signal that consumer spending eased at the start of Q4 following a surprisingly strong pick-up in September. In addition, Friday's German labor market numbers will provide insights into jobless claims and job vacancies in November.

Gilts also made modest gains on a quiet day for United Kingdom economic news on Thursday, added Daiwa.

On an otherwise quiet end to the week for UK data, Friday will bring bank lending figures for October, pointed out the bank. Demand for credit is expected to edge up over coming quarters, as suggested by the Bank of England's latest quarterly Credit Conditions Survey, as gradual easing in Bank Rate feeds through into less restrictive borrowing conditions.

Recent rounds of the money and credit report have noted a steady recovery in mortgage lending. But whilst mortgage approvals rose to a two-year high at the end of September -- 65,700 -- greater caution ahead of the government's budget announcement at the end of October as well as a recent rise in interest rates on new mortgage deals might well have led to a dip in approvals last month.