The yield on the 10-year Italian government bond was recently at 3.775%, up from about 3.8% before the announcement. On Tuesday, Italy’s core borrowing costs reached 4.19%, marking the highest level since 2013. Bond yields are declining as prices rise. Italy’s key FTSE MIB stock index was one of the most successful in Europe, rising 2.8%. Shares of Italian banks moved higher. FinecoBank rose 7.1%, while UniCredit gained 4.8%. Intesa Sanpaolo rose 5.3%. A key indicator of financial stress in the eurozone – the difference between the yield on the 10-year German benchmark government bond and the Italian equivalent – fell to 2.15 percentage points from 2.4 percentage points on Tuesday. This difference had risen to its highest level since 2020 in recent days. The market relief came after the ECB announced plans to address the recent rise in borrowing costs for southern European economies. The ECB has said it plans to “flexibly” reinvest bond yields bought under the emergency pandemic bond purchase program, known as PEPP. Seamus Mac Gorain, head of global interest rates at JP Morgan Asset Management, estimated that this could amount to about $ 200 billion – the equivalent of $ 208 billion – in additional bond purchases this year. These will target economies facing problems such as Italy. “It is gradually useful, but I do not think it is big enough to change the situation,” he said. The ECB also said it would start working on a broader tool to address the risk of fragmentation within the bloc, although it did not provide details. The euro, which had risen almost 1% earlier in the day against the dollar, abandoned its gains to trade steadily.
