- Italy-Germany 10-year spread widens from least since June 13
- Polls are divided on outcome of Thursday’s EU vote in U.K.
German 10-year yields fell from a two-week high as new opinion polls were divided on the outcome of Thursday’s U.K. referendum on its membership to the European Union.
The yield difference, or spread, between Italian 10-year bonds and similar-maturity German bunds widened from the tightest in a week. It narrowed the most in more than four months Monday when polls saw Britain’s “Remain” camp recapturing the lead.
Europe’s peripheral debt has underperformed Germany in the past month amid concern that a Brexit would spark economic turmoil in the euro area as well. Even after Thursday’s vote, the region’s bonds may face more volatility as Spanish general elections take place on June 26.
“The market now looks now pretty strongly skewed towards ‘Remain’ judging from how far spreads have tightened in,” said Peter Chatwell, head of rates strategy at Mizuho International Plc in London. “Client activity is more skewed towards a fine-tuning of positioning, rather than taking any new risk on.”
German 10-year yields were little changed at 0.06 percent as of 4:04 p.m. London time, after rising to 0.075 percent, the highest since June 7. The price of the 0.5 percent security due in February 2026 was 104.27 percent of face value.
The yield on Italy’s 10-year bond increased two basis points, or 0.02 percentage point, to 1.45 percent. That left the spread versus German bunds at 1.39 percentage points, having narrowed earlier to 1.37 percentage points, the lowest since June 13.
Germany’s sovereign securities returned 1.3 percent in the past month, according to Bloomberg World Bond Indexes, while Italy’s earned 0.9 percent and Spain’s 0.8 percent.