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LONDON, Nov. 22 (Reuters) – Italy's bond yields fell by 18 basis points on Thursday, prolonging yesterday's sharp declines and narrowing the spread relative to German benchmark bond yields.
Analysts have attributed this development to a number of factors, including signs of compromise between Rome and the European Union, linked to a controversial Italian budget and a hedge of short positions.
Italian traders added that discussions on a new cycle of cheap multi-year loans to banks – called TLTROs – from the ECB, helped explain the latest fall in yields.
Although this discussion does not seem to have been triggered immediately, the ECB minutes later during this session might provide a better understanding of whether policy makers discussed TLTROs at their October meeting.
Italy's two-year bond yield was 18.2%, its lowest level in two months, compared with 18 basis points.
Italian five-year bond yields also fell by 18 basis points to 2.48%, while the 10-year Italian-German bond yield spread narrowed from 317 base points at 305 basis points at the beginning of the session. (Report by Dhara Ranasinghe, Additional report by Valentina Za in MILAN, Edited by Abhinav Ramnarayan)
