Italian yields falls as EU finance ministers meet again on rescue package

• However, euro bonds remain out of the question, Finance Minister Gernot Bluemel said on Thursday.
•  The 10-year Italian yield was down 3.2 bps at 1.601% .
• The European Central Bank will on Thursday release minutes of its March 12 and March 18 meetings.

LONDON: Italian government bond yields fell on Thursday after European Union budget hawk Austria said it was willing to compromise to reach a deal on the bloc's response to the coronavirus crisis.

However, euro bonds remain out of the question, Finance Minister Gernot Bluemel said on Thursday.

Earlier, Italian two-year BTP yields rose to a three-week high as investors awaited to see whether European finance ministers would be able to agree on an economic rescue package.

Yields across core euro zone bond markets were down by 3 to 6 basis points.

The spread of the novel coronavirus has shut down most European economies, prompting officials to look for creative ways to revive growth, including issuing commonly shared debt known as "coronabonds".

But EU ministers on Wednesday failed to agree on a rescue package to help economies recover from the impact of the coronavirus outbreak because of a feud between Italy and the Netherlands.

They will give it another go on Thursday, they said.

"While we do anticipate an agreement will be reached as regards the use of the ESM (European Stability Mechanism) and its existing funding tools and capacity, we also expect this will fall short of what Italy and Spain would like to see tabled," said Richard McGuire, head of rates strategy at Rabobank.

The annual cost to Germany of jointly issuing debt with other euro zone states should amount to a maximum of around 0.36% of economic output, research by US bank Jefferies showed on Wednesday, in one of the first cost estimates of the hotly disputed project.

Germany, together with the Netherlands, failed to agree with the southern countries on which conditions coronabonds would be issued, believing it would lead to wealthier countries underwriting the debt of southern peers. Diplomatic sources and officials said the feud was blocking progress on half a trillion euros worth of aid.

The Italian 2-year government bond yield was last down 2 bps at 0.67%, having earlier risen more than 12 bps to 0.813%, its highest since March 19. It remained way below the level it skyrocketed to on March 17 when it rose above 1.5%.

The 10-year Italian yield was down 3.2 bps at 1.601% .

The German 10-year Bund yield was last down 3 bps at -0.34% . The 10-year yield in the Netherlands was down 4 bps at -0.076%. Yields in France and Belgium were down by 5 and 6 bps respectively .

The European Central Bank will on Thursday release minutes of its March 12 and March 18 meetings, when it launched a barrage of new measures, though shied away from cutting rates.

"They may reveal in greater detail the pressure points that have worried policy makers, to the extent that they broke with previously thought sacrosanct limits of their QE (quantitative easing) programmes," said Padhraic Garvey, regional head of research at ING.