Italian 10-year yield at one-week low of 3.33%
LONDON: Italy’s 10-year government bond yield fell to a one-week low on Monday, narrowing the gap over safer German peers, on relief that ratings agency Standard & Poor’s left the country’s credit rating unchanged.
S&P on Friday left Italy’s rating at BBB, two notches above junk, but lowered its outlook to negative from stable, saying that the new government’s policy plans were weighing on the country’s growth and debt prospects.
But the decision to leave the rating unchanged a week after Moody’s downgraded it, bought some relief to a bond market hurt by the spending plans of the new government in Rome, tension with the European Union and heightened concern about the implications for the country’s ratings.
In early Monday trade, yields on Italian government bonds were down six to 16 basis points across maturities.
Italy’s 10-year bond yield fell to a one-week low at 3.33 per cent, while yields on most other eurozone peers were higher on the day as a firmer tone to European stock markets took the shine off broader fixed income markets.
The fall in Italian bond yields narrowed the gap over top-rated German bond yields to 299 bps from around 306 bps late Friday.
“The ratings update was a relief,” Commerzbank rates strategist Rainer Guntermann said.
“The underlying budget concern is an ongoing issue but the ratings risks are out of the way for the rest of the year as there’s no more scheduled ratings decisions.”