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Euro zone yields rise again as Italy and UK keep traders on edge

LONDON (Reuters) – Euro zone government bond yields rose to multi-year highs on Tuesday as investors braced for further interest rate hikes, while the fallout from Britain’s “mini-budget” continued to weigh on financial markets.

In European morning trade, yields were up 2 to 5 basis points in most markets, with Germany ) at one point near a new yearly high of nearly11 – 2.%, then slipped to 2.62 %..

Italian yield with annual yield The rate rose markedly 251 from a basis point at 4. 62% after briefly breaking above 4.7%, following Monday’s right-wing coalition in Sunday’s election Take a big move after winning a clear majority.

Giorgia Meloni looks set to become Italy’s first female prime minister to head the far-right government since World War II, inheriting the euro zone’s biggest debt amid growing concern One of the burdens is slowing interest rates and economic growth.

“Policy uncertainty will continue to be the main driver here. In the coming days, we expect leaders of other parties to support Melloni. This should lead to a calm performance ( Namely, spreads will not explode disproportionately until the “2023-budget-discussion-storm” that may develop throughout October,” Mizuho analysts said.

The closely watched spread between Italian and German yields widened to as high as 265 bps to 251 bps in previous initial trades, Still near the highest level since July.

Markets will be closely watching the ECB’s view of rising Italian yields. On Monday, ECB President Christine Lagarde said at Responding to questions about Italy’s possible next government, the bank said the bank would not use its latest emergency plan to buy bonds from countries that made “policy mistakes”.


Four members of the ECB’s Governing Council (GC) are scheduled to speak on Tuesday. UniCredit analysts noted that this includes two dovish members and two members considered to be centrists on current monetary policy who will listen to why the decision was made This month from the European Central Bank unanimously.

Fed officials renewed their hawkish rhetoric on Monday, saying their top priority remains controlling domestic inflation, even as market volatility increases.

) Investors were also nervous after a sharp sell-off in British government bonds triggered by a series of tax cuts announced on Friday by the British government, which will be paid for by more public borrowing. The prospect of tens of billions of pounds of borrowing has left markets Feeling jittery and sending the pound to an all-time low.

Rate hike expectations have soared in recent days, which some analysts say has gone too far

“We think investors have a reasonable chance of seeing these peaks as tops, and there is little incentive to price in higher expectations at this stage. Growth concerns seem to be completely overwhelmed in recent days. Overlooked,” UniCredit analysts said.



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