Italy’s 10-year yield falls below 3 percent as pre-election fears fade


Italian bonds rallied, sending 10-year yields below 3 percent for the first time since May, as investors bet a new government will not jeopardize reforms needed to mobilize European Union funds for the… release land.

Markets fell as much as 16 basis points to 2.86 percent, narrowing the spread over German peers for a third day – the longest streak since June – to 209 basis points.

It comes after Bloomberg News reported on Friday that far-right leader Giorgia Meloni, who is leading opinion polls ahead of September’s snap elections, plans to stick to EU budget rules.

The country is to receive around 200 billion euros in EU funds.

The rally more than erases the widening in spreads that followed Mario Draghi’s resignation as prime minister, a move that has raised the prospect of political instability and stoked fears that a government less committed to modernizing the economy may be heading towards the might come.

It also relieves the European Central Bank, which has pledged to intervene if Italy’s borrowing costs rise too much compared to Germany.

“It reflects the hope that the election campaign and the new government will not put Draghi’s fiscal and reform track record in question,” said Antoine Bouvet, senior interest rate strategist at ING Groep NV, adding: “Of course it’s still early days and I am personally would be cautious before reaching any conclusion on that front.”

Investors’ call for holding Italian bonds against German equivalents rose to nearly 250 basis points after the Draghi government collapsed last month, a level some investors say could prompt policymakers to act.

The sell-off was amplified as the ECB embarked on its first tightening cycle in ten years, a major headwind for weaker economies like Italy.

An indicator of economic activity in Italy by S&P Global in July fell to its lowest level since June 2020 for the fifth straight month, highlighting the challenges facing the country.

The FTSE MIB index outperformed other European equity benchmarks on Monday, rising 0.9 percent and led by insurance stocks. Italy’s 10-year yield falls below 3 percent as pre-election fears fade

Fry Electronics Team

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