LONDON: Italian bonds rose on Wednesday, extending the previous day's gains after a bumper retail bond sale, highlighting a hunt for higher returns as monetary easing by global central banks depresses yields on low-risk debt.
Italian bonds outperformed Bunds the euro zone's lowest-risk debt after a sale of inflation-linked bonds targeted at wealthy domestic investors on Tuesday raised 17 billion euros, beating the Treasury's predictions of just under 10 billion euros.
Demand for euro zone debt is also benefiting from anticipation that Japanese buyers will seek higher returns in foreign bonds after the Bank of Japan's huge money printing plans which have kicked yields on domestic bonds to ultra-low levels.
"The global liquidity rush is helping to support peripheral bonds. We've seen this with the Italian bond sale and that has helped to maintain the positive sentiment," said Philip Tyson, a strategist at ICAP.
"The whole QE (quantitative easing) move out of Japan and the liquidity sloshing around the system is outweighing any fundamental concerns about the strength of the economy and the political situation in Italy. It seems like that will continue for now."
Italian 10-year yields were 7 basis points lower at 4.24 percent with Spanish equivalents down by a similar amount at 4.67 percent.
Some in the market were also betting on a solid sale of Spanish bonds on Thursday, with investors' trust in the European Central Bank's as-yet-untested pledge to buy bonds of struggling issuers if requested underpinning demand for lower-rated bonds.
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