Spanish, Italian bond yields fall; euro bounces

LONDON: Spanish and Italian government bond yields fell and the euro turned positive against the dollar on Tuesday, on reports that German Finance Minister Wolfgang Schaeuble said instruments to tackle the debt crisis could be used without prior announcement.

Spanish 10-year yields were last 14 basis points lower at 6.93 percent, while equivalent Italian yields were 12 bps lower at 5.98 percent.

Two-year Spanish yields were 17 bps lower at 4.98 percent, while their Italian counterparts were 26 bps down at 4.19 percent.

"It's very thin, the smallest trade will move the market a fair degree," one trader said.

"The front-end of Italy/Spain is too cheap really given where other markets are trading. If you argue everything else is at or going to zero then at some point you're going to see some hunting for yield."

The euro turned positive on the day against the dollar, rising to a session high of $1.2323 on trading platform EBS.