Italian government securities Monday declined for a second day as the euro-area’s biggest sovereign-debt market prepared to sell bonds this week for the first since July.
Bloomberg News reports that Italy’s 10-year yield climbed toward a three-week high amid tensions over former Prime Minister Silvio Berlusconi’s political future.
The nation will sell €4bn ($5.35bn) of inflation-linked and zero-coupon debt tomorrow, €8.5bn of bills the next day and an unspecified amount of bonds on Wednesday.
Spain will also sell bills tomorrow. German bunds rose along with Austrian and Dutch securities as a slide in US durable-goods orders spurred demand for safer assets.
“What’s driving Spain and Italy is the prospect for a resumption of issuance,” said Marius Daheim, a senior fixed-income strategist at Bayerische Landesbank in Munich.
“Spreads have narrowed quite strongly because of the lack of issuance over the past weeks and maybe there will be profit taking and spread widening as markets prepare themselves.”
Italian 10-year yield rose eight basis points, or 0.08 percentage point, to 4.40 per cent at 3:16 p.m.
London time after climbing to 4.41 per cent on August 22, the highest since July 31. The 4.5 per cent security due in May 2023 fell 0.58, or €5.80 per ¤1,000 face amount, to 101.13.
The extra yield investors demand to hold the securities instead of similar-maturity bunds widened 11 basis points to 250 basis points after contracting to 227 basis points on August 19, the narrowest since July 2011.
The Cabinet of Italian Prime Minister, Enrico Letta, meets today to discuss streamlining the country’s political administration.
Members of Berlusconi’s People of Liberty party have threatened to topple the government if the billionaire media-magnate is ousted from the Senate following a conviction for tax fraud.
A crisis in the government would push the 10-year yield spread beyond 300 basis points “in a few days,” New York University Professor Nouriel Roubini said in an interview with La Repubblica newspaper.
“The fear of a Berlusconi return is rattling Italian bonds,” said David Keeble, head of fixed-income strategy at Credit Agricole Corporate & Investment Bank in New York.
“We have a nagging doubt there will soon be some unsettling news. Bunds are scooping up the difficulties in Italy.”
Spain’s 10-year yield climbed one basis point to 4.47 per cent.
The government will sell as much as €4bn of 84- and 259-day bills tomorrow.
German 10-year bonds advanced for the first time in four days as the US Commerce Department said durable goods orders fell by 7.3 per cent in July, the biggest decline since August 2012.
Germany’s 10-year bund yield fell four basis points to 1.90 per cent after climbing to 1.98 percent on August 23, the highest since March 2012.
Similar-maturity Austrian yields slipped three basis points to 2.31 percent and those in the Netherlands fell three basis points to 2.29 per cent.