April 24, 2020 / 2:31 PM / 3 months ago

Bank of Italy steps up bond buying on ECB behalf-market sources

MILAN/ROME, April 24 (Reuters) - The Bank of Italy stepped up buying of Italian government bonds on behalf of the European Central Bank on Friday, two market sources told Reuters.

Italy’s 10-year bond yields fell almost 10 basis points on the day at 1.91. That reversed an earlier sharp rise that took borrowing costs above 2% after Thursday’s European Union summit failed to give details of the size, speed and structure of an emergency pandemic recovery fund.

Two market sources in Italy said central bank buying to support Italian bonds appeared to have been stepped up slightly. Data suggests the ECB has been front-loading its asset purchases to contain a rise in Italy’s borrowing costs.

One primary dealer told Reuters the ECB was currently buying Italian government bonds at an average slightly higher than the previous days.

Another source said they also believed the Bank of Italy, acting on behalf of the ECB, was more active in the market on Friday. They said short-covering ahead of the weekend may also have contributed to the recovery in Italian bonds. (Reporting by Sara Rossi in Milan and Stefano Bernabei in Rome; Writing by Dhara Ranasinghe; Editing by Sujata Rao)

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