Italian, Spanish bond yields extend fall

LONDON: Italian and Spanish government bond yields dipped on Monday, extending last week's fall following an agreement by European leaders to re-model the euro zone's rescue fund.

Italian 10-year yields fell 10 basis points to 5.72 percent, while two-year yields dropped 24 basis points to 3.56 percent. Ten-year Spanish yields were down 8.5 bps at 3.25 percent and two-year yields were down 23 bps at 4.18 percent.

"The steepening is being led by the front end as default risk is priced out of the market so using this as a barometer of residual optimism from the summit, it suggests that the proposals do appear to have legs," Rabobank strategist Richard McGuire said.