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April 7 (Bloomberg) -- Italian government bonds fell, pushing 10-year yields up from a record low, as investors monitored speeches by European Central Bank policy makers for signs of whether they will introduce new stimulus.

Spanish 10-year yields climbed from the lowest level since 2005 after Governing Council member Ewald Nowotny said there was no immediate need for further action. The ECB has simulated deploying a quantitative-easing program of as much 1 trillion euros ($1.37 trillion) to combat the threat of deflation, a person familiar with the situation said last week. It’s a “long way” from theoretical concept to QE implementation, ECB executive board member Yves Mersch said today.

“Yields are slightly higher and spreads slightly wider so it’s a limited correction,” said Patrick Jacq, a fixed-income strategist at BNP Paribas SA in Paris. “The market is digesting everything. We saw such huge movements recently it makes sense to take some profit on spread compression while waiting for fresh ECB news. This does not mean key strategy trade ideas regarding spread compression are now challenged.”

Italy’s 10-year yield rose two basis points, or 0.02 percentage point, to 3.19 percent at 4:19 p.m. London time after declining to 3.142 percent, the lowest since Bloomberg began collecting data on the securities in 1993. The 4.5 percent bond due in March 2024 fell 0.2, or 2 euros per 1,000-euro face amount, to 111.245.

Mersch, Constancio

Mersch said in London he doesn’t see an imminent risk of deflation and preparation allows policy makers to react faster. The central bank is ready to act swiftly if inflation falls too low and is resolute on loose monetary policy, ECB Vice President Vitor Constancio said in Brussels. Governing Council member Jens Weidmann speaking in Amsterdam said he hadn’t changed his position on bond buying.

Spain’s 10-year yield climbed four basis points to 3.19 percent after falling to 3.13 percent, the lowest level since October 2005. Similar-maturity German bund yields were little changed at 1.54 percent.

Bonds from Europe’s most-indebted nations have rallied this year as investors returned to markets they shunned during the region’s debt crisis amid speculation the ECB will introduce new stimulus measures. The central bank ran multiple QE models and there was no pre-agreement on any QE action or its size, according to the person familiar.

Bond Returns

Italian bonds returned 6.1 percent this year through April 4, according to Bloomberg World Bond Indexes. Greek securities rose 31 percent, Spain’s gained 6.5 percent and Germany’s advanced 2.5 percent.

Volatility on German bonds was the highest in euro-area markets today, followed by those of Spain and Austria, according to measures of 10-year debt, the yield spread between two- and 10-year securities and credit-default swaps.

Spain’s five-year yield dropped below that of similar-maturity Treasuries last week for the first time since 2007. The Spanish yield was little changed at 1.72 percent today, while the equivalent U.S. rate fell three basis points to 1.67 percent.

The Spanish yield may fall 50 basis points below that of Treasuries, Royal Bank of Scotland Group Plc analysts led by Andrew Roberts, head of European rates strategy in London, wrote in an e-mailed note dated April 4. RBS “remain very bullish periphery,” the analysts wrote.

To contact the reporters on this story: Lucy Meakin in London at; David Goodman in London at

To contact the editors responsible for this story: Paul Dobson at Keith Jenkins, Nicholas Reynolds

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