The yield on Finland’s 1.625 percent 2022 note fell seven basis points to 1.67 percent at 12:26 p.m. in Helsinki. The yield decline was the biggest among the euro area’s best-rated sovereigns, aside from Germany. The difference in yield relative to the benchmark 10-year German bund widened one basis point to 19 basis points.
“Italy’s election results were quite a shock to the markets,” Suvi Kosonen, an analyst at Nordea Bank AB in Helsinki, said by phone. “Markets hadn’t priced in any negative developments in peripheral yields. Finland’s borrowing costs have also declined strongly with Germany. Finnish bonds are in demand in this situation where money managers look for safer investments.”
Investor jitters in the 17-nation single-currency zone may intensify after Italy’s inconclusive election results showed the electorate rejected austerity measures implemented by incumbent Premier Mario Monti to contain the country’s financial crisis.
Italy’s yield spread to 10-year German bonds widened 40 basis points to 333 basis points as its bond yield jumped 32 basis points to 4.8 percent. One basis point is 0.01 percentage point.
Pre-election favorite Pier Luigi Bersani won the lower house by less than half a percentage point, while Silvio Berlusconi, the former premier fighting a tax-fraud conviction, won a blocking minority in the Senate. Berlusconi and former comedian Beppe Grillo, the candidates running to reverse austerity policies, won about 55 percent of the popular vote.
Finland has the only stable AAA rating in the euro area at Moody’s Investors Service, Standard & Poor’s and Fitch Ratings. Germany and Luxembourg have negative outlooks at Moody’s while the Netherlands risks a downgrade at all three rating companies.
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