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  • z99oo z99oo Nov 14, 2011 11:25 AM Flag

    Italian Bond Yields Flash Warning Signal

    The yield on Italian 10-year bonds rallied early on Monday afternoon to 6.7pc, while equivalent Spanish bond yields hit 6.03pc, up from 5pc five weeks ago.
    It is the first time Spanish bonds have breached the 6pc line since the European Central Bank resumed debt purchases on August 8.
    It leaves Spain with borrowing costs closer to those of Italy as the ECB's purchases fail to cap yields, and reveals investors' scepticism as to whether eurozone leaders will be able to push through reforms to end the debt crisis.
    Italian bond yields fell from a record high of 7.48pc last week as Silvio Berlusconi made his way for the exit, but jumped again today before Mario Monti, the new technocrat leader, had even named his ministers or laid out a timetable to form a government.
    “There’s a high probability of Spain following Italy,” said Phyllis Reed, head of fixed-income research at Kleinwort Benson Bank in London. “In the very short term, the trigger is just the fact that we’re getting close to the edge of the abyss with the euro.”

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