Borrowing costs in troubled eurozone
countries Italy, Spain and Portugal fell on Thursday, on the back of
market optimism fueled by the deal eurozone members struck this week
to continue bailout aid for Greece.
Italy sold 3 billion euros' (3.9 billion dollars') worth of
10-year bonds at a yield of 4.45 per cent, down from 4.92 per cent at
a previous bond auction in late October. It was the lowest yield
level since late 2010.
The yield difference, or spread, between Italian and German
10-year bonds - a key risk indicator - fell below 3.1 percentage
points in morning trading, an eight-month low. It later edged up
slightly to 3.14 percentage points.
A year ago, when a worsening debt crisis forced former prime
minister Silvio Berlusconi to step down in favour of Mario Monti, a
non-partisan economist, the Italy-Germany spread was around 5
percentage points, a level seen as unsustainable.
In another positive development for Italy, a closely-followed
industrial confidence index rose to 88.5 in November from 87.8 in
October, national statistics office Istat said. Analysts had
predicted an increase to 88.
In Spain, another vulnerable eurozone member, the yield on 10-year
bonds fell below 5.3 per cent. That left the spread with German bonds
hovering around 3.9 percentage points, another eight-month low.
In Portugal, two-year bonds had a yield of 3.8 per cent, the
lowest since November 2010. Yields plunged below 7.6 per cent on
10-year bonds and to around 6 per cent on five-year bonds, down from
17 and 22 per cent respectively 10 months ago.
Markets have rewarded the austerity policies of Prime Minister
Pedro Passos Coelho, who is following the guidelines of the European
Union and the International Monetary Fund.
The two institutions granted Portugal bailout funding worth 78
billion euros (100 billion dollars) in 2011.
Wednesday's approval by the European Union of Spanish banks'
restructuring plans, a positive report on Madrid by the International
Monetary Fund, as well as optimism about a deal in the United States
to avoid the so-called fiscal cliff contributed to boost market
confidence, analysts said.
