Italian Bond Rally Weakens Monti’s Hand With Merkel: Euro Credit
Italian Prime Minister Mario Monti’s campaign for collective action to fight Europe’s debt crisis may be compromised by falling bond yields as he meets German Chancellor Angela Merkel.
Italy’s credit is as good as it has been in three months, according to a decline in 10-year bond yields. Short-term rates have fallen too. Monti’s Treasury sold six-month bills today at the lowest rate since March. That may make it easier for Merkel, who is hosting Monti in Berlin today, to sidestep the Italian premier’s proposal for the region’s rescue funds to buy bonds with the support of the European Central Bank.
“Monti’s arguments have more force when yields are spiking in spite of the fact that his government has implemented a number of credible reforms,” said Mujtaba Rahman, an analyst at Eurasia Group in New York. “It is at this moment when his argument carries more thrust with the Germans.”