Italian BTP yields rise, moves subdued before month's end


Reuters | Updated: 29-05-2020 13:24 IST | Created: 29-05-2020 13:24 IST
Italian BTP yields rise, moves subdued before month's end

Italian government bonds fell on Friday as investors grew worried before a European Commission rescue plan takes form, although yields were mostly stable across the euro zone. The commission proposed a 750 billion-euro recovery fund on Wednesday that would offer 500 billion euros in grants and 250 billion euros in loans to help coronavirus-hit economies recover. While markets awaited the response from EU nations, investors wondered when the fund would be ready for use.

European Union leaders must approve it fast to avert a long recession for a region shattered by the coronavirus pandemic, Spain's foreign minister said on Thursday. Italy and Spain, hard hit by the pandemic, rely heavily on tourism and need the recovery fund to avoid tapping capital markets for more funds and raising their debt levels.

Italian 10-year yields were up 2 basis points at 1.45% after falling on Thursday to 1.42%, an eight-week low. Italian bonds have benefited from the proposed EU recovery plans. Italy plans to tap the bond market on Friday and sell up to 7.5 billion euros of five-year and 10-year bonds and a floating-rate note.

Interest rates overall in the euro zone market remained calm as month-end investment adjustments kept moves subdued. German 10-year Bund yields were down 1.5 bps at -0.43% , with rest of the core market falling 1 to 2 bps as well.

"Month-end rebalancing flow should help to flatten yield curves and push rates lower," said Padhraic Garvey, regional head of research at ING. "This effect is temporary and should unwind at the start of next," he said, adding that he expected spreads to remain tight for the foreseeable future as the European Central Bank is expected to announce more quantitative easing purchases next week.

German government bonds gained as U.S.-China tensions rattled investors. U.S. President Donald Trump said on Thursday he would hold a news conference on China on Friday, as his administration moves to pressure Beijing over its treatment of Hong Kong. In addition, German retail sales fell far less than expected in April.

Traders will be watching euro zone inflation data for May at 0900 GMT. Economists polled by Reuters forecast flash year-on-year inflation to rise 0.1%, a smaller increase than the 0.3% the month before.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

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