Italy's 10-year bond yield rises to two-month high

Italy's 10-year bond yield rose almost 4 basis points to a peak of 0.82% as prices fell and the gap over German peers widened out to 106 bps -- the most since early March. Analysts noted upcoming supply as one reason for weakness in peripheral bonds, along with a feeling that a brighter outlook for the euro area could encourage the European Central Bank to slow the pace of its bond buying stimulus in the months ahead .


Reuters | Updated: 26-04-2021 15:48 IST | Created: 26-04-2021 15:48 IST
Italy's 10-year bond yield rises to two-month high

Italy's 10-year bond yield rose to a two-month high on Monday with most other euro zone bond yields also nudging higher as a growing sense that the worst may be behind for a coronavirus-battered economy took hold. Italy's 10-year bond yield rose almost 4 basis points to a peak of 0.82% as prices fell and the gap over German peers widened out to 106 bps -- the most since early March.

Analysts noted upcoming supply as one reason for weakness in peripheral bonds, along with a feeling that a brighter outlook for the euro area could encourage the European Central Bank to slow the pace of its bond buying stimulus in the months ahead . Greek 10-year yields were up 2.5 bps at 0.92%, shrugging off S&P's decision on Friday to lift Greece's rating a notch to 'BB'.

"Bonds are a bit on the back foot and that might be in anticipation of a generally less supportive ECB environment after June," said ING senior rates strategist Antoine Bouvet. "That's the main factor and also when we get an environment where rates are moving higher there tends to be greater volatility in Italy versus say the German bond market."

Most 10-year bond yields across the currency bloc were a touch higher on the day, while U.S. Treasury yields also edged up. Germany's Ifo institute said its business climate index, viewed as a leading economic indicator, edged up to 96.8 on April from 96.6 in March, rising less than expected as a third wave of COVID-19 weighed on Europe's biggest economy.

Analysts said the data suggested a pause rather than a slowdown in economic activity with a pick-up in the vaccination rollout boosting the outlook. The EU should meet its target of vaccinating 70% of adults by summer, according to NatWest Markets.

Germany's 10-year Bund yield was up half a basis point at -0.25%, but below seven-week highs hit last week. Andreas Billmeier, European economist Western Asset, said the uptrend in European bond yields should be gradual and fits in with the overall picture of a recovering economy.

"If you take out the U.S. rates dynamic, what you have is an economic recovery and that should go hand in hand with higher rates," he said. "Note that the ECB didn't make a peep when yields rose between December and February but only once volatility coming from the U.S. kicked in."

The ECB stepped up the pace of its bond purchases in March to contain a rise in borrowing costs, driven by U.S. Treasuries.

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

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