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Italian Government Debt Risk Premium Falls Slightly as ECB Maintains Interest Rates

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The European Central Bank’s decision to hold interest rates and continue reinvesting the proceeds from its pandemic-era bond purchases until the end of next year had a slight impact on the risk premium of Italian government debt. Following the announcement, the spread between Italian and German 10-year bond yields fell to 200 basis points from around 202 basis points.

Investors had widely anticipated the decision, and as a result, the euro remained relatively unchanged, down 0.27% at $1.0538. The benchmark for the euro zone, Germany’s 10-year bond yield, also saw a slight decrease, falling by 1 basis point to 2.881% from 2.891% previously. Italy’s 10-year yield, on the other hand, decreased by 3 basis points to 4.887%.

The European Central Bank reiterated its commitment to continue topping up the 1.7 trillion-euro ($1.79 trillion) pile of bonds purchased under its Pandemic Emergency Purchase Programme (PEPP) until the end of next year.

As a result of the ECB’s decision, Europe’s benchmark STOXX 600 index managed to slightly pare its losses, down 0.72% compared to its previous decline of 0.83%. However, weak earnings across various sectors weighed heavily on the index.

Overall, the European Central Bank’s stance and commitment to maintaining its bond-buying program provided some relief to the risk premium on Italian government debt. The decision was widely anticipated by investors and had a modest impact on the euro and bond yields. However, weak earnings continued to put pressure on the European stock market.

This article contains reporting by Harry Robertson.

More detail via Yahoo! Finance here… ( Image via Yahoo! Finance )

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