Italian Notes Slide Before Election; Bunds Gain on Haven Demand

Italian notes dropped for the fifth week in six weeks amid speculation parliamentary elections will result in a hung parliament, derailing economic reforms in Europe’s biggest debt market.

The country’s two-year yields climbed toward the highest level since the start of January as the latest polls before the vote tomorrow and Monday showed front-runner Pier Luigi Bersani is unlikely to gain enough seats to govern without a coalition. Former Premier Silvio Berlusconi was in second place. German bonds rallied this week, with yields dropping this most since December, as a euro-area report showing manufacturing and services shrank boosted demand for the region’s safest assets.