Italian bonds slumped, driving the five-year note yield to more than 7 percent for the first time since the euro was started in 1999, after LCH Clearnet SA raised the deposit it demands for trading the nation’s securities.
The extra yield investors demand to hold 10-year Italian debt instead of similar-maturity benchmark German bunds reached 5 percentage points as Prime Minister Silvio Berlusconi’s offer to resign left the nation seeking a government capable of implementing austerity measures to reduce borrowing costs. Germany and Finland plan to sell securities today. Bunds climbed, while the euro weakened.
The LCH change for Italy “is a big deal in that it highlights the deterioration of its credit quality,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London.
“The more pressing issue still remains the political backdrop. The market would love a technocrat government to get the reforms through. If we go down the election route we’ve probably got three months of inaction.”
The yield on Italy’s five-year notes jumped 27 basis points, or 0.27 percentage point, to 7.14 percent at 9:44 a.m. London time. The 4.75 percent securities due in September 2016 dropped 0.98, or 9.80 euros per 1,000-euro ($1,372) face amount, to 90.825.
The two-year note yield climbed 43 basis points to 6.81 percent. Ten-year rates rose 19 basis points to 6.96 percent. The difference in yield between the Italian and German 10-year yields increased to as much as 520 basis points, or 5.20 percentage points.
CDS Record
Credit-default swaps protecting Italy’s government bonds rose 12 basis points to a record 536, according to CMA prices.
The yield on the bund fell four basis points to 1.76 percent, with the euro sliding 1 percent to $1.3702.
Italy’s two-year yield earlier climbed above the rate on 10-year bonds.
Germany plans to sell 2 billion euros of inflation-linked securities maturing in April 2018, with Finland auctioning debt due in April 2017 and April 2021.
German bunds have handed investors a profit of 8.6 percent this year, matching U.S. Treasuries, which have also returned 8.6 percent, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Italian bonds lost 8.9 percent.
businessweek.com
The extra yield investors demand to hold 10-year Italian debt instead of similar-maturity benchmark German bunds reached 5 percentage points as Prime Minister Silvio Berlusconi’s offer to resign left the nation seeking a government capable of implementing austerity measures to reduce borrowing costs. Germany and Finland plan to sell securities today. Bunds climbed, while the euro weakened.
The LCH change for Italy “is a big deal in that it highlights the deterioration of its credit quality,” said Eric Wand, a fixed-income strategist at Lloyds Bank Corporate Markets in London.
“The more pressing issue still remains the political backdrop. The market would love a technocrat government to get the reforms through. If we go down the election route we’ve probably got three months of inaction.”
The yield on Italy’s five-year notes jumped 27 basis points, or 0.27 percentage point, to 7.14 percent at 9:44 a.m. London time. The 4.75 percent securities due in September 2016 dropped 0.98, or 9.80 euros per 1,000-euro ($1,372) face amount, to 90.825.
The two-year note yield climbed 43 basis points to 6.81 percent. Ten-year rates rose 19 basis points to 6.96 percent. The difference in yield between the Italian and German 10-year yields increased to as much as 520 basis points, or 5.20 percentage points.
CDS Record
Credit-default swaps protecting Italy’s government bonds rose 12 basis points to a record 536, according to CMA prices.
The yield on the bund fell four basis points to 1.76 percent, with the euro sliding 1 percent to $1.3702.
Italy’s two-year yield earlier climbed above the rate on 10-year bonds.
Germany plans to sell 2 billion euros of inflation-linked securities maturing in April 2018, with Finland auctioning debt due in April 2017 and April 2021.
German bunds have handed investors a profit of 8.6 percent this year, matching U.S. Treasuries, which have also returned 8.6 percent, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Italian bonds lost 8.9 percent.
businessweek.com
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