LONDON: The premium investors demand for holding euro zone periphery government bonds over top-rated German peers narrowed sharply on Thursday after the European Central Bank left its ultra-easy monetary policy stance unchanged.
The gap between Spanish and German 10-year government bond yields narrowed to 94 basis points, its tightest level since March 2015 .
The Portuguese yield gap with Germany was at its tightest since February 2016 at 248 bps, while the Italian/German yield spread was its narrowest since January at 157 basis points.
"Draghi was always going to be more dovish then he was in Sintra," said Orlando Green, European fixed income strategist at Credit Agricole, referring to recent comments by ECB chief Mario Draghi in Portugal. "Against this backdrop and with volatility low, there is demand for peripheral bonds going into the quiet summer months."
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