Dovish ECB Keeps Italy Bond Yields at Lowest in 8 Weeks

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LONDON, June 14 Reuters Italys 10year sovereign borrowing costs were pinned at their lowest levels in almost eight weeks on Monday, with a view that the European Central Bank is in no rush to taper its aggressive emergency stimulus supported by comments by its president.

The euro zone economy is at a turning point but its recovery must be firm and sustainable before the central bank can debate clawing back emergency support, ECB President Christine Lagarde told Politico in an interview.

The ECB last week agreed to maintain an elevated pace of bond purchases to keep borrowing costs ultra low and policymakers did not entertain questions about tapering support, even as the economy rebounds from the COVID19 shock.

This backdrop has supported euro zone bond markets in recent days, allowing yields to fall further.

Italy, one of the biggest beneficiaries of ECB bondbuying, has led the way.

Its 10year bond yield touched 0.74 in early Monday trade , its lowest level in almost eight weeks.

Rainer Guntermann, rates strategist at Commerzbank, said a brighter economic outlook for Italy where the central bank on Friday revised up its 2021 growth outlook to close to 5, was also boosting sentiment.

BTPs Italian bonds continue to outperform, helped by upbeat GDP projections from the Bank of Italy on Friday, and 10year BTPBund spreads are flirting with the 100bp level with the Februarylows at 90bp also moving in sight, he said.

The closelywatched gap between Italian and German…

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