UPDATE 1-Italy's bond yields test three-week highs on economy worries
Data last week confirmed Italy's economy had slipped into a recession in the fourth quarter of 2018, while manufacturing contracted for the fourth month running in January -- suggesting that things could get worse for the economy. Weaker data in general has bolstered euro zone bond markets as investors bet the European Central Bank will keep record-low rates in place for longer.
But in Italy, the poor data has only exacerbated concern about a further deterioration in public finances and fuelled speculation about further budget measures. Italy is one of the most indebted countries in the euro area. "The scepticism that we saw last year about the wisdom of the new government's fiscal plans is being revived by the economic data," said Chris Scicluna, head of economic research at Daiwa Capital Markets in London.
"There is a decent chance that we will see another quarter of negative growth in Q1." Daiwa expects the Italian economy to grow just 0.1 percent in 2019. Last month, the Bank of Italy cut its 2019 economic growth forecast to 0.6 percent from 1 percent.
Italy's 10-year yield rose almost eight basis points to 2.806 percent before drifting lower to around 2.72 percent, down just one bp on the day. After a heavy selloff, bonds across the curve found more stable ground, with two- and five-year yields also a touch lower on the day .
They remained within sight of three-weeks highs and analysts said the pain for Italy's bond market was not over yet. "Italy has a huge debt burden and they (the government)had hoped for better growth," said Michael Hewson, chief markets analyst at CMC Markets. "At some point this year, Italy will flare up as problem once more."
Outside Italy, yields on most 10-year bonds in the bloc were a touch higher on the day. Germany's 10-year Bund yield, at 0.17 percent, held near recent one-month lows. (Reporting by Dhara Ranasinghe, editing by Larry King)
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)
ALSO READ
Swiss government renews contribution to climate fund for developing countries
Voters in many countries sceptical of democracy, poll shows
India expands strategic presence; to have defence attaches in more countries in Africa, Asia
Apple warns users in 91 countries, including India, of Pegasus-like 'mercenary spyware' attacks
Italy plans to invite South American, African countries to June G7 summit