Italy’s Supercharged Bond Market Is All About Faith in the ECB
(Bloomberg) — One of Europe’s riskiest bond bets is turning into a telltale sign of how much faith investors have in the central bank’s ability to engineer a smooth recovery out of the pandemic.
Italian benchmark yields are near a six-month low and the government is so flush with cash that it canceled last week’s debt auction. The market is beginning to look like a crowded trade, with the number of outstanding positions in bond futures at the highest since March.
It’s the latest evidence of the bullishness that’s swept across European markets. Italy is among the region’s most indebted nations yet has seen borrowing costs crater thanks to unprecedented stimulus from the European Central Bank that is quashing volatility and driving investors into the highest-yielding corners of the market.
“The PEPP extension could be crucial in that regard,” said Christoph Rieger, head…