Italy Bond Selloff Pushes Yield to 3-Month High Amid Equity Rout

  • Yield spread over bunds jumped most since June on Monday
  • German 10-year yield falls below 0.2% for 1st time since April

Italian and Spanish 10-year government bonds dropped, pushing the additional yield investors demand to hold the securities over benchmark German bunds to the most since July, as a rout in riskier assets persisted around the world.

Italy’s 10-year bond yield climbed to its highest since November, further widening the spread versus similar-maturity bunds that had already expanded on Monday by the most since June. Portugal’s 10-year bond yield touched the highest since October 2014 amid a selloff that has roiled markets from corporate bonds to stocks. Germany’s 10-year bund yield dropped below 0.2 percent for the first time since April as investors sought the region’s safest sovereign securities.

“Spreads on government bonds spiked in tandem with risk premiums relating to the banking sector in the euro periphery,” Hendrik Lodde, a Frankfurt-based fixed-income strategist at DZ Bank AG, wrote in an e-mailed note. “The current bout of risk aversion is mainly underpinning demand for comparatively secure asset classes.”

The Italian 10-year bond yield rose two basis points, or 0.02 percentage point, to 1.70 percent at 4:16 p.m. London time. It earlier touched 1.77 percent, the highest since November, after surging 24 basis points over the previous three days. The 2 percent security due in December 2025 fell 0.21, or 2.10 euros per 1,000-euro ($1,132) face amount, to 102.755.

Germany’s 10-year bund yield increased two basis points to 0.24 percent, having earlier dropped to 0.19 percent, the lowest since April 29. The Italian yield spread over bunds widened earlier to as much as 156 basis points, the most since July. The yield on similar-maturity Spanish securities rose two basis points to 1.78 percent. The yield spread versus bunds earlier jumped to as much as 163 basis points. also the widest since July.

Portugal’s 10-year bond yields rose 33 basis points to 3.71 percent, and reached 3.73 percent, increasing the spread with equivalent German bunds to as much as 350 basis points, the widest since January 2014.

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