German 10-year bund yields plunge to April 2017 lows on rising political uncertainties; Italy-German yield spread widest in 5 years

The German 10-year bund yields slumped to lows seen since a year ago in April 2017, tracking the growing intensity of political uncertainties in the Italian economy, with the Italy-bund yield spread widening to highest since October 2013. This indicates that the burgeoning political massacre in the former has led to investors shift safe-haven interests to German bunds.

The German 10-year bond yields, which move inversely to its price, plunged 9-1/2 basis points to 0.25 percent, the yield on 30-year note slumped nearly 8-1/2 basis points to 0.97 percent and the yield on short-term 2-year traded 7-1/2 years low to -0.80 percent by 09:45GMT.

Spreads between Italian 10-year government bonds (BTPs) and German Bunds of the same maturity clocked in at 2.53 percentage points on Tuesday, from 2.34 the previous day and 1.22 at the end of April.

After the collapse this weekend of a coalition of two populist parties, early elections are now expected to be called this autumn. The concern among analysts besides the immediate political uncertainty is that fresh polls could provide a Eurosceptic party with a firm mandate to take a more confrontational stance with the EU and push for fiscal policies that could break rules set by Brussels, Financial Times reported.

Meanwhile, the German DAX slumped 1.75 percent to 12,644.67 by 09:50GMT, while at 09:00GMT, the FxWirePro's Hourly Euro Strength Index remained highly bearish at -142.67 (higher than +75 represents bullish trend). For more details, visit http://www.fxwirepro.com/currencyindex

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