Italian bonds gain on weak industrial production figure

The Italian government bonds gained on Monday after reading weak February industrial production figure. The benchmark 10-year bonds yield, which is inversely proportional to bond price fell 1.72 pct to 1.297 pct and 3-year bonds yield dipped 16.76 pct to 0.059 pct 9:50 GMT.

The industrial production fell in February, reflecting concerns about the pace of recovery that prompted the government to cut this year’s growth outlook. The output declined 0.6 pct m/m (consensus was for -0.9 pct m/m fall), previous reading of +1.7 pct, revised down from +1.9 pct.

The government led by Prime Minister Matteo Renzi last week cut its forecast for economic growth of 2016 and 2016 amid a weaker dynamic of global demand and consumer prices. He said that he targets a GDP rise of 1.2 pct in 2016 and 1.4 pct in 2017, down from previous projections of 1.6 pct for both years.

The country’s unemployment rose in February as a discount on social contributions for businesses hiring more workers on a long-term basis was being phased out, stripping job creation of a key boost. The jobless rate increased to 11.7 pct from a revised 11.6 pct in January. That compares with a high of 12.8 pct at the start of 2014, but it is still almost twice the rate it was in mid-2007.

Lastly, if inflation and GDP growth fail to improve over the coming months, ECB easing will occur sooner rather than later, pushing bonds prices further up.