Italian bond yields fall ahead of coalition vote

03 Sep 2019

On Tuesday, Italy’s 10-year government bond yield fell to a new low as investors are keeping an eye on the 5-Star party members’ online ballot, which see whether a coalition deal with the Democratic Party will be approved or not. The ballot will be online between 07:00 until 16:00 GMT on the 5-Star party’s internet platform. Previously, La7 television channel reported that 69% of PD supporters are in favour of the coalition whereas 51% of 5-Star followers supported the idea. This was concluded after an SWG opinion poll.  

Sovereign bond yields dropped between 3 and 5bps, as the 10-year yields fell to 0.924%. Looking at the opinion poll, strategist at Commerzbank Rainer Guntermann noted, ‘There is relief coming through that there is no larger objection 1/8from 5-Star 3/8.’ Additionally, 2-year and 5-year yields were also lowered, being valued at -0.26% and 0.33%. Guntermann also said that bond yields could continue their decline if Italy receives political good news. ‘If there is a broader package than most market participants expect... Italy would gain more than others.’ 

Furthermore, other European government bond yields also dropped due to concerns around Brexit leading to demand for safe-haven assets. U.S. manufacturing data will be released later today.