“Italy’s two-year notes advanced, pushing yields down the most in three weeks, amid easing investor concern that budget reforms will be derailed as former Prime Minister Silvio Berlusconi seeks a political comeback.
Italian 10-year yields rose above 4.50 percent for the first time this year. A report showed European services output in January shrank less than initially estimated. German 10-year bonds snapped a three-day advance as European stocks gained, sapping demand for the safest assets. Spanish notes rose, after falling for four days, as Prime Minister Mariano Rajoy battled to rebut corruption allegations.
Italian two-year yields declined 10 basis points, or 0.10 percentage point, to 1.63 percent at 10:28 a.m. London time, the steepest slide since Jan. 10. The 6 percent security due November 2014 rose 0.17 or 1.70 euros per 1,000 euro ($1,354) face amount, to 107.57.
“It is perhaps too soon to conclude that this is the long- awaited reality check by the market,” said Elwin de Groot, a market economist at Rabobank Nederland in Utrecht, the Netherlands. “Political factors such as we are seeing in Spain and Italy at the moment are always extremely difficult to gauge. This could weigh on Spanish and Italian bonds for some time but we should acknowledge the rally in markets since mid-2012.”
Yields on Spanish 10-year bonds were little changed at 5.44 percent while those on securities due in two years declined three basis points to 2.85 percent.
