Italian Bonds Fall From Grace on Contagion Concern: Euro Credit

Italian bonds turned a first-quarter rally into the third-worst performance in Europe as concern mounted that government leaders won’t prevent the debt crisis from spreading to the region’s biggest fixed-income market.

Italy’s debt had the second-best returns after Portugal of the 17 euro-area nations in the three months through March and then handed investors a loss of 2.2 percent in the past quarter. Italian bonds fell for a third day with the 10-year yield rising as much as 10 basis points to 6.08 percent after European Central Bank President Mario Draghi said yesterday the reduction in interest rates to a record low may offer little help as the euro-area economy slides toward recession.