Italian debt yields slip, ECB seen buying

LONDON: Italian government bond yields fell on Thursday, with two-year debt yielding slightly less than 10-year maturities as traders said the European Central Bank was buying the country's short-term bonds in the secondary market.

"We have seen the SMP (ECB's Securities Market Programme) asking in 2-3 year paper in regular size," a trader said.

Another trader said the central bank had been buying the paper before an auction of Italian 12-month Treasury bills seen as a key test of investor appetite for the country's debt after yields spiked to levels seen as unsustainable to finance its debt burden.

Italian 10-year government bond yields were last down six basis points at 7.2 percent while two-year debt was 27 bps lower on the day at 7.13 bps, having traded above the longer-dated maturity on Wednessday for the first time since the launch of the euro.

Copyright Reuters, 2011