Italian Bonds Advance on Bets ECB Will Contain Cyprus Contagion

Italian and Spanish bonds rose this week as investors bet the European Central Bank’s pledge to buy the securities of struggling countries would prevent turmoil in Cyprus from spreading to other high debt and deficit nations.

Italy’s 10-year yield fell to the lowest in three weeks yesterday as President Giorgio Napolitano asked Democratic Party leader Pier Luigi Bersani to try to form a government, a month after inconclusive elections. The bonds of so-called peripheral nations slid at the start of this week as Cyprus sought, then rejected, an unprecedented tax on bank deposits, threatening to reignite Europe’s debt crisis. ECB President Mario Draghi pledged in July to do “whatever it takes” to protect the euro.