LONDON: Spanish and Italian government bond yields rose on Monday as hopes faded that a European Union summit later this week will produce game-changing measures to tackle the debt crisis.
German Chancellor Angela Merkel agreed on Friday with leaders of France, Italy and Spain on a 130 billion euros ($156 billion) package to revive growth but resisted pressure for common euro zone bonds or a more flexible use of Europe's rescue funds.
"Last week (there were) a lot of expectations for the summit ... and progress on debt mutualisation on either extended role for the (European Central Bank) or some progress made towards the EFSF or ESM (euro zone bailout funds) buying bonds in the secondary market," one trader said.
"It looks like over the weekend Germany has basically said no to all of those."
Spanish 10-year yields were 9 basis points higher at 6.44 percent, while their Italian equivalent rose 7 bps to 5.88 percent.
Shorter-term debt underperformed, with two-year Spanish yields up 14 bps at 4.62 percent and two-year Italian yields up 19 bps at 3.99 percent.
German Bund futures were 60 ticks higher on the day at 141.48.
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