The Buzz
Why Italian bonds are rallying
November 29, 2012: 10:38 AM ET
Italy's borrowing costs continue to fall as investors bet the European Central Bank will backstop the nation's massive bond market.
The Italian government sold €2.9 billion worth of 10-year bonds Thursday at a yield of 4.45%, down from 4.92% at the previous auction in October. It also sold €3 billion of 5-year notes at a yield of 3.23%, compared with 3.80% last month. Yields and prices move in opposite direction.
In the secondary market, yields on Italian 10-year bonds fell to 4.47%, near the lowest levels since the euro crisis erupted in 2011.
The results are a far cry from the record-high interest rates Rome was forced to pay earlier this year, when 10-year yields rose above 7%.
Italy has enjoyed favorable market conditions since the ECB announced plans to intervene in the bond market for countries that commit to an official economic and fiscal reform program.
Rome is not expected to tap the ECB's outright monetary transaction program, but the promise of potentially unlimited bond purchases has calmed jittery investors.
Related: Eurozone business mood ticks up
Spain has also benefited from the potential ECB intervention. Yields on Spanish 10-year bonds were trading around 5.34% on Thursday, down from highs above 7% in July.
The decline in Italy's borrowing costs comes despite tepid economic growth and an uncertain political outlook, with Prime Minister Mario Monti expected to step down next year.
"There's a degree of complacency about Italy right now," wrote Nicholas Spiro, director of London-based consultancy Spiro Sovereign Strategy, in a note to clients.
Investors are "overlooking the significant political and economic risks," he continued, pointing to the politics surrounding Italy's economic reform program and the severity of the nation's downturn.
-
Obama is not market's puppet master
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
The market plunged Wednesday and many on Wall Street were quick to point the finger at President Obama. The huge slide clearly must have been investors' way of showing how disappointed they were that Mitt Romney MORE
Paul R. La Monica - Nov 8, 2012 12:07 PM ETPosted in: Apple, barack obama, earnings, Europe, European Central Bank, federal reserve, fiscal cliff -
European leaders 'still behind the curve'
Following years of setbacks and shortfalls, efforts to stabilize the euro currency union finally appear to be taking shape, with policymakers scoring two key victories in as many weeks.
"It's encouraging to see, but all these measures were necessary to preserve the status quo," said Marie Diron, senior economic adviser at Ernst & Young in London. "Without these things, the situation would have been quite dire, but we've learned to be MORE
Ben Rooney - Sep 14, 2012 7:44 AM ETPosted in: banking union, debt crisis, ECB, euro, European Central Bank, eurozone, GDP, germany, greece, italy, spain -
Euro hits 4-month high
The euro continues to rally against the U.S. dollar, as investors welcome positive developments in Europe and anticipate more easing by the Federal Reserve.
After falling to a multi-year low of $1.20 in July, the euro rose to $1.2842 on Tuesday -- its highest level since May 11.
Europe's single currency has been supported recently by hopes for bold action by the European Central Bank, which announced last week that it would MORE
Ben Rooney - Sep 11, 2012 1:34 PM ET -
Spain's 10-year bond yield drops below 6%
Investors drove up prices for Spanish bonds Friday, forcing yields to their lowest level since May, on hopes the European Central Bank will soon intervene in the market.
The yield on Spain's 10-year bond fell to a low of 5.68%, dropping below the key 6% threshold for the first time in over three months. Italian bond yields also fell sharply, hitting a low near 5%.
The spike in demand for Spanish and MORE
Ben Rooney - Sep 7, 2012 11:56 AM ET -
Draghi: 'Exceptional measures' may be needed
European Central Bank President Mario Draghi defended the euro currency Wednesday and reiterated that "exceptional measures" are justified to stabilize financial markets.
In an op-ed published in German newsweekly Die Zeit, Draghi said the euro was launched as a "currency without a state," built on an "institutional framework" that left it vulnerable to crises.
Draghi went on to say that the the euro area needs a "new architecture" to complete the monetary MORE
Ben Rooney - Aug 29, 2012 12:55 PM ET -
Spanish economy shrinks, along with its borrowing costs
In the bizarre logic of financial markets, bad economic news continues to be viewed positively by many investors.
Spain is the latest example. The Spanish government released data Tuesday that showed the nation's economic recession deepening, yet borrowing costs continued to ease.
Spanish GDP shrank 0.4% in the second quarter, following a decline of 0.3% in the first quarter. The data confirmed a report released earlier this month from Eurostat that showed MORE
Ben Rooney - Aug 28, 2012 10:47 AM ET -
Spain, Italy back in bond market firing line
Spain and Italy came under renewed pressure in the bond market Friday after the European Central Bank said it would not buy government bonds unless specific conditions are met.
One week after he said the ECB would do "whatever it takes" to support the euro currency, ECB president Mario Draghi said Thursday that governments, including those in Spain and Italy, must first ask the eurozone bailout funds to buy bonds before MORE
Ben Rooney - Aug 3, 2012 7:34 AM ET -
Will Mario Draghi and the ECB deliver?
After the Federal Reserve declined to spike the punchbowl Wednesday, fans of monetary stimulus are now entirely dependent on the European Central Bank for a fix.
In leaving its policies unchanged, the Fed gave investors what they expected, but not what they wanted. Now, all eyes are turning to Frankfurt, where top ECB officials will meet Thursday for their monthly policy discussion.
ECB president Mario Draghi raised the stakes last week when MORE
Ben Rooney - Aug 1, 2012 3:48 PM ET -
Why Warren Buffett may be wrong on gold
The opinions expressed in this commentary are solely those of Paul R. La Monica. Other than Time Warner, the parent of CNNMoney, and Abbott Laboratories, La Monica does not own positions in any individual stocks.
Warren Buffett is one of the world's most famous and successful investors. You have to take almost anything he says seriously. But his loathing for gold? That's another story.
The Berkshire Hathaway (BRKA) (BRKB) chairman and CEO MORE
Paul R. La Monica - Jul 31, 2012 1:13 PM ET
- Herbalife soars. Get Bill Ackman a vitamin?(1:01)
- Will Tumblr make Yahoo cool again?(1:16)
- No life of luxury: Nordstrom stock falls(0:52)
- Kohl's is the anti Wal-Mart(1:03)
- Nothing runs like a Deere (investor)(1:16)
- Who says video game stocks are dead?(1:22)
- Bond investors fear another 1994(1:09)
- The Gap is cool again?(1:03)
