Italian 10-year yields, which have an inverse relationship with prices, fell for the first time since August 19, with traders estimating that the ECB had bought about €3 billion in Italian and Spanish bonds on Tuesday. The Spanish bond markets also broke a seven-day losing streak.
Italian 10-year yields fell by 6 basis points to 5.48 per cent and Spanish yields dropped 7bp to 5.25 per cent. However, the stresses in the eurozone market are underlined by the large premium both Italy and Spain have to pay over Germany to borrow in the markets. One trader said: “Italian yields may have fallen but that is only because of ECB intervention. I have not seen any private clients wanting to buy Italian bonds. The only reason why Italian yields have fallen is because the selling pressure from private funds has eased. The ECB is just about keeping the market orderly, but how long will they keep on buying? This is the worry for the eurozone.”
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