Slovenian Bond Yield Falls Below 7% as ECB Buys Italian Debt

Slovenia’s 10-year government bonds rose, pushing the yield below 7 percent for the first time in 10 days as the European Central Bank stepped up purchases of Italian government debt.

The yield fell to 6.964 percent at 5:14 p.m. in Ljubljana, according to Bloomberg data, after reaching a record 7.77 percent on Nov. 11. Analysts, including Michal Dybula from BNP Paribas in Warsaw said Slovenian government securities are “a victim” of the country’s proximity to Italy and the presence of Italian banks in the former Yugoslav republic.

“The premium fell because the yield on Italian securities fell below the 7 percent threshold,” Radivoj Pregelj, an analyst at lender Abanka Vipa d.d. said in an e-mail today. “Still, these high yield levels show that Slovenia got ‘contaminated’ in investors’ perception.”

Slovenia, which borders Italy, saw its borrowing costs advance after the rejection of pension changes in June, the credit rating cut by major ratings services in September and October and its failure to rein in spending. The country, which adopted the euro in 2007, faces an early vote next month after the ouster of the government of Prime Minister Pahor on Sept. 20.

The European Central Bank bought Italian government bonds today, according to three people familiar with the transactions. The yield on the 10-year Italian government notes was at 6.655 percent at 5:14 p.m.

Slovenia is rated AA- at S&P and Fitch and an equivalent Aa3 at Moody’s, the fourth highest investment grade.

To contact the reporter on this story: Boris Cerni in Ljubljana at bcerni@bloomberg.net

To contact the editor responsible for this story: James M. Gomez at jagomez@bloomberg.net

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