Italy yields fall on the back of the Napolitano re-election

Following the re-election of Giorgio Napolitano as president of Italy, Italian government bond yields have fallen to record lows since 2010, following a decreased chance of new elections in the summer.

According to data from Interactive Data, the Italian 10 year bond yield fell below 4% and bonds were 10-12bp lower across the curve this morning. Spanish yields also continued on a downward trend, in line with Italian government sector. The decrease in yields is 12-14bp in the short end and 16-18bp in 10-year.

“Towards the end of March, Silvio Berlusconi (centre-right) said he would back up Luigi Bersani’s (centre-left) party in government but a coalition with his political opponent was dismissed by Bersani and a new election seemed to be becoming more of a certainty. This however had hardly any effect on Italian bonds as the 10 year government benchmark yield remained relatively stable during the month, moving from 4.68% at the beginning of March to 4.73% at the end of the month,” the data provider said.

At the end of March, Italy executed a new issue in 5-year and 10-year maturities. The issue amount of €6.91bn came in at the upper end of the €6-7bn expected range, and in the secondary market, yields were initially 12-16bp higher.

On April 18, the voting process for the election of the new Italian president started. Franco Marini, former trade unionist and president of the Senate was expected to win the election and in the secondary market, yields were around 3bp lower in 10-year and 5bp lower in the short end.

After an inconclusive election, the Italian parliament voted again on April 19, however both Italian and Spanish yields were stable in the secondary market during the morning as the market awaited the outcome.

 

 

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