Italian sovereign spread down against Bunds

Spreads on Italian government debt versus German government debt is down to its lowest level in a decade, following renewed expectations that key eurozone countries have moved out of recession along with stronger growth suggested in latest ZEW data on the German economy.

Denmark’s Børsen has reported that the spread on 10-year Italian debt versus Bunds is down to 241 basis points, following a 3 bps rise in the yield on Bunds and a 1 bps fall in the yield on Italian debt.

The Danish paper notes a report published in the past week suggesting that Italy is coming out of recession. And expectations are growing that key data for the eurozone yet to be published will show the region posting positive GDP growth figures for the first time since 2011.

Meanwhile, Swedish business daily Dagens Industri has picked up on the data published by the ZEW Center for European Economic Research, which points to a marked upturn in growth expectations in Germany.

ZEW noted that demand levels in Germany are high, with rising business sentiment among institutional investors and analysts. ZEW added that there are other signs that recession is over in key eurozone countries.

Data published by Thomson Reuters on the morning of 13 August suggest that borrowing costs are lower in just two developed countries compared to Bunds: Switzerland, which yields 0.99%, and Japan, which yields 0.74%.

Within Europe there remains a clear North-South split, with borrowing costs only marginally higher in the Nordic region. Based on yields, Swedish government debt is on a spread of 0.49% against Bunds, Finland is on 0.26%, and Denmark on 0.15%.

Greece continues to pay the highest borrowing cost, with a yield spread against Bunds of 8.12%, the data suggests.


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