"The ECB continued to buy Spanish and Italian bonds, but much less than on Monday," Laurent Fransolet, head of European fixed-income strategy research in London, wrote in a research report.
"It is not a surprise that the performance of Spain and Italy was limited. If yields or spreads become too tight/low, it could generate new selling by investors or limit demand when supply comes back to the market in September."
Italian government bonds opened Wednesday at 284.44 before dropping below 280 points. The current spread or difference in the rate of return on Italian 10-year government bonds and the benchmark German bond, the strongest in the eurozone, fell 0.749 percent to 278.52 basis points.
Italian 10-year yields slid seven basis points on Tuesday to 5.22 percent. The yield spread tightened 10 basis points to 292 basis points.
Spanish 10-year bond yields declined eight basis points to 5.08 percent.
Last Friday, amid mounting concern about the eurozone debt crisis, Italy`s debt risk premium rose to its highest level since the creation of the euro and the yield on the 10-year bonds remained well above the danger level of six percent, at 6.15 percent.
Earlier in the day, it rose to 6.23 percent overtaking the Spanish yield for the first time since April 2010.
The ECB this week began buying up Spanish and Italian government bonds to counter those countries` spiralling borrowing costs, calming investor jitters and causing stock exchanges in Milan and Madrid to rally on Monday and into Tuesday.
Last week, worries over the two countries contributed to the turmoil in global markets, which saw around 1.5 trillion dollars wiped off share prices.
(T.A045/H-AK)
Editor: Priyambodo RH
Copyright © ANTARA 2011
