Eurozone yields.

Italy’s 10-year bond yield touched a six-week low yesterday, closing the gap over toprated German peers to its tightest this year following signs of outsized buying of Italian debt by the European Central Bank. Data released late on Monday showed the Frankfurt-headquartered ECB bought far more Italian bonds than it was supposed to in July for its monetary stimulus scheme, making up for a dwindling supply of eligible debt elsewhere in the single-currency bloc. The ECB and Bank of Italy together bought 9.6 billion euros of Italian debt, nearly 1.5 billion more than the composition of the 60-billion euros monthly purchase would dictate. This was the biggest deviation from Italy’s quota relative to the size of the overall monthly amount. French and Spanish bond purchases by the ECB were also oversized in July compared to their shares of the European Central Bank’s capital, the yardstick used to determine how many bonds must be bought. This may help explain why peripheral bond markets held up relatively well during a sell-off that followed comments by Mario Draghi at the ECB Forum on Central Banking in Sintra, Portugal in late June. The ECB president’s remarks at the event were widely viewed as presaging a shift in the European Central Bank’s ultra-loose monetary policy stance in coming months. Italian bonds have recovered most of the losses made in the wake of Draghi’s Sintra speech, with yields roughly 10 basis points above where they traded the day before the comments. In contrast, German Bund yields are about 21 basis points higher. Across the eurozone, bond yields were up slightly yesterday.