Finnish government bond yields fell to a record low, underscoring the divergence within the euro area as investors speculate on the unity of the bloc.
The yield on the 10-year securities slid to 1.57 percent, the lowest since at least 1996. The yield has dropped nine basis points this week and is poised for a sixth week of declines. Spain’s similar-maturity yield was at 6.615 percent today and Italy’s bond yielded 5.926 percent.
Finland’s 10-year benchmark spread to similar-maturity German notes narrowed to 29 basis points, the lowest among the 17 euro members. It costs less to insure against a Finnish default than it does for any other member in the single currency bloc, including Germany, credit derivatives show.
Finland’s top credit rating and stable outlook reflect the resilience of the economy, Moody’s Investors Service said in a statement today. Finland is the only Nordic country using the euro and has earned its AAA rating through fiscal prudence.
It hasn’t breached the European Union’s budget deficit rule since 1997 even as its economy suffered a drop of 8.4 percent in 2009, the biggest contraction since the 1918 civil war. Domestic demand is underpinning growth, estimated at 0.8 percent this year, the European Commission said today, reiterating a forecast.