By Dhara Ranasinghe
LONDON, Oct 13 (Reuters) – Long-dated sovereign bond yields in Italy and Greece touched fresh record lows on Tuesday, with Italian borrowing costs at an auction also hitting new all-time lows in the latest sign of solid demand for peripheral euro zone debt.
Expectations for further European Central Bank stimulus to prop up an economy hit by the coronavirus have bolstered debt markets in recent weeks.
In addition, bond issuance is not as heavy as it was a few months ago — meaning upward pressure from anticipated bond supply has eased. Most euro zone issuers have now achieved 80% or more of their gross bond issuance target for 2020, Rabobank estimates.
“That rally in peripheral bonds has meant we are near our year-end target on spreads,” said Andrew Sheets, Morgan Stanley’s chief cross-asset strategist.
“I really think this is a story about supply — the periphery