May 22, 2018 / 10:37 AM / 3 months ago

Traders dismiss rumours of lower-than-usual ECB buys of Italy bonds

MILAN, May 22 (Reuters) - The European Central Bank is buying regular amounts of Italian government bonds under its quantitative easing programme, three traders at as many primary dealers said, dismissing rumours of smaller-than-usual purchases.

The sharp increase in Italian government bond yields witnessed in recent days had fuelled market speculation that the ECB may have curbed its purchases of Italian debt in a warning to the country’s incoming government.

The anti-establishment 5-Star Movement and the far-right League have agreed on a government programme and put forward their choice of prime minister in an effort to overcome political deadlock following an inconclusive March 4 election.

The coalition programme, which pledges to increase spending while cutting taxes and rolling back on a crucial pension reform, has spooked financial markets prompting investors to dump Italian government bonds.

The premium Italy pays over Germany on a 10-year bond maturity rose by nearly 60 basis points over the past four sessions, hitting a high since June 2017 on Monday at 190 basis points.

The ECB declined to comment on the rumours. (Reporting by Giulio Piovaccari, Elvira Pollina and Luca Trogni, writing by Valentina Za, editing by Agnieszka Flak)

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