Italian two-year note yields surged the most in over a year, as the nation's borrowing costs rose at a debt sale and contagion from Greece's debt crisis spread across the 17-nation euro region.
Yields on notes from Ireland, Portugal and Greece soared to euro-era records, while German bunds advanced for the fifth time in six weeks as Europe's politicians clashed over how to craft a new rescue plan for Greece involving private bondholders. Spanish and Italian 10-year bonds slumped, sending yields to the most since the euro's inception in 1999, as borrowing costs rose to a three-year high at a sale of five-year Italian securities. France, Spain and Germany plan to sell debt this week.
"The market isn't looking at fundamentals, it is just worried about contagion," said Huw Worthington, a fixed-income strategist at Barclays Capital in London. "There's been growing infection across most of the euro-region issuers and it's hard to see what the catalyst is going to be to get confidence back into the markets with all the issuance next week."
Italy's two-year yield climbed 75 basis points over the week to 4.26 per cent in London on Friday. That's the biggest weekly increase since the five trading days ending May 7, 2010, the week before Europe's leaders announced a $1 trillion backstop for the euro. Yields on 10-year notes advanced 48 basis points to 5.75 per cent. They reached 6.02 per cent on July 12, the most since 1997.
A market selloff last week that sent Italian stocks sliding and bond yields surging led Prime Minister Silvio Berlusconi to push for the speedy passage of €40 billion (Dh207 billion) in deficit cuts to balance the budget in 2014 in an attempt to shield his country from the crisis. Ireland's two-year bonds plunged after Moody's Investors Service cut the nation to Ba1 from Baa3 on June 12, saying it is likely to need a second bailout. The country's two-year yields climbed 6.9 percentage points to a record 23.12 per cent.
From / Gulf News