LONDON: Italy's 10-year bond yield fell to a two-week low on Monday, pushed down by a ratings upgrade from Fitch.
Fitch Ratings late on Friday lifted Italy's sovereign credit rating by one notch to BBB, citing confidence in the economic outlook supported by the use of the European Union's post-pandemic recovery fund.
That ensured a positive start to the week for Italian bonds, with prices rising and yields falling. Italy's 10-year bond yield fell around 2.5 basis points to around 0.90% - a two-week low.
"BTPs in particular should see further tailwinds from the rating upgrade by Fitch," said Commerzbank rates strategist Rainer Guntermann.
Italian bonds, also known as BTPs, outperformed euro zone peers, with broader markets generally subdued as investors continue to await more details on the new Omicron coronavirus variant and what it means for the global economic outlook and European Central Bank policy.
Germany's benchmark 10-year Bund yield was down just a basis point in early trade at around -0.39%. Most other long-dated bond yields in the bloc were just a touch lower on the day.
The ECB may set policy for a relatively short period at this month's meeting, given heightened uncertainty, but should not delay a decision as markets need direction, ECB President Christine Lagarde told Reuters on Friday.
Bond strategists expected issuance in the euro area at around 10 billion euros this week, winding down ahead of the year-end. Many of the bloc's issuers are also expected to unveil their issuance plans for the year ahead.