Spanish government bonds are beating their Italian equivalents as the nations’ political fortunes diverge. Spain has moved closer to forming a government after acting Prime Minister Mariano Rajoy made progress in alliance talks, while Italy faces increased pressure on its banks and a fourth-quarter referendum that may cost Premier Matteo Renzi his job. The premium investors demand for holding Italian 10-year securities instead of similar-maturity Spanish debt has risen to the most in more than 18 months.

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