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Italian bond spread hovers around 300 points

Calm returns to bond market after alarm of Monti's resignation

19 December, 11:09
Italian bond spread hovers around 300 points (ANSA) - Rome, December 19 - The spread between 10-year Italian bonds and the German equivalent was hovering at around 300 basis points on Wednesday after briefly dipping below the psychologically important threshold.

The spread, which closed at 304 points on Tuesday, dropped to 299 points before climbing back to 302 with a yield of 4.45%.

The spread - a key measure of market confidence in the country's ability to weather the eurozone crisis - went under the 300-points mark for the first time since March at the start of this month before rising back above it.

It soared to 360 basis points after Premier Mario Monti said he would resign when the 2013 budget law is approved after after Silvio Berlusconi's People of Freedom (PdL) party stopped backing the government.

But the spread gradually came back down and the fact that it dipped below the 300-points mark again on Wednesday suggests calm has returned to the bond market. Austerity measures and structural economic reforms carried out by Monti's emergency government have boosted investor faith in Italy after the country's borrowing costs looked in danger of becoming unsustainably high last year, when the crisis forced Berlusconi to quit as premier.

Furthermore, Italy's borrowing costs have come down significantly since July when European Central Bank President Mario Draghi pledged to do whatever was necessary to support the euro.

He followed those words with action in September, when the ECB established a bond-buying program for stressed countries.