LONDON: Italian bond yields fell on Monday, outperforming euro zone peers a day before a debt exchange aimed at easing the country's 2015 and 2017 repayment burden.
Perkier demand for risk assets after upbeat Chinese export data at the weekend also underpinned demand for lower-rated euro zone bonds.
The Italian Treasury will buy back on Tuesday floating rate notes (CCTs) maturing in Dec. 2014 and Sept. 2015, fixed rate bonds maturing in March 2015 and April 2015 and bonds linked to euro zone inflation maturing in Sept. 2017.
This will be Rome's second bond exchange in about three weeks after a successful swap of 2015 and 2017 paper for 2018 bonds last month helped ease near-term debt repayments.
Italian bonds also benefited from reduced supply pressure after Rome cancelled its mid-month bond auction, having completed its 2013 funding thanks to a record retail-targeted bond sale last month.
"The treasury is planning to reduce the cliff of redemptions for 2014 and 2015 with longer maturities so that's positive news for Italy and that could be another driver for tightening of spreads," said ING strategist Alessandro Giansanti.
"I think the treasury will offer some good pricing and there will be a good opportunity for investors to give back the bond and extend on the curve to move to five years, where there's higher yield." Italian 10-year yields were last 4 basis points lower at 4.16 percent with Spanish equivalents trading at the same level, down 3 basis points.
Waning fears of an Italian government collapse, after Prime Minister Enrico Letta survived a confidence vote last month and former premier Silvio Berlusconi was expelled from parliament, also supported demand for the country's bonds.
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