May 22, 2020 / 11:51 AM / 14 days ago

UPDATE 2-Italian bond yields set for biggest weekly fall in 8 weeks

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr (Updates prices)

By Yoruk Bahceli

LONDON, May 22 (Reuters) - Italian 10-year government bond yields were on course for their biggest weekly fall in eight weeks after a European Union proposal for a recovery fund that could provide grants to help the highly indebted country’s coronavirus-hit economy.

Bond investors had hoped for some form of EU joint effort to tackle the costs of fighting the coronavirus pandemic because financing for the proposed fund would not count towards Italy’s already hefty debt burden.

The proposal helped push Italy’s 10-year bond yield down 25 basis points this week, its largest weekly fall in eight weeks.

“The proposal as it stands is unambiguously positive for the BTP market. It’s good for peripherals, in some ways it’s good for banks, but let’s see what the details are,” said Invesco macro analyst Mark McDonnell.

“The market must be optimistic, but I think there is a little bit of concern priced in there as well. We’ve been here before and it’s not going to be easy to get everyone on board.”

The spotlight is on a group of European Union states opposed to big spending by the bloc, which will present a counter-proposal to the Franco-German plan and whether there may be adjustments to the proposal, such as providing some funds as loans rather than grants.

Investors will also watch for the European Commission’s own proposal for a recovery fund, due next Wednesday.

On Friday euro zone bond yields were little changed, with Germany’s 10-year benchmark up 1.3 bps at -0.48%, having fallen earlier to -0.52%. Italian 10-year bond yields were down 2.9 bps at 1.60% after touching a six-week low of 1.597%.

Bonds were not much moved by China’s decision to skip setting a 2020 gross domestic product growth target - the first time it has not set a target since it began publishing the metric in 1990. Unlike global stock markets, bonds were also largely unaffected by the flare-up in U.S.-China tensions over Chinese security measures in Hong Kong.

Analysts are awaiting release of the European Central Bank’s meeting minutes from April expected later on Friday.

However, that meeting preceded the German constitutional court ruling that gave the country’s central bank three months to prove that the ECB’s conventional bond-buying scheme was necessary and proportional.

Reporting by Yoruk Bahceli Editing by David Goodman and Andrew Heavens

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below