Bonds: Italian debt steadies ahead of referendum

These were the movements in some of the most widely-followed 10-year sovereign bond yields:

US: 2.31% (-0bp)

UK: 1.37% (-1bp)
Germany: 0.22% (+2bp)
France: 0.70% (-7bp)
Italy: 1.94% (-12bp)
Spain: 1.51% (-5bp)
Portugal: 3.62% (+2bp)
Greece: 6.94% (-4bp)
Japan: 0.02% (-0bp)

Gilts were slighly bid even as news broke that the European Central Bank might step-in to help prop up markets in the event of a negative result in the 4 December constitutional referendum in Italy.

Citing four sources from Eurozone central banks, Reuters reported that the ECB might step-up its purchases of Italian debt should the plebiscite in the country lead to dislocations in financial markets.

In parallel, officials in Rome denied a report in Corriere della Sera according to which Prime Minister Matteo Renzi might resign even if he won the referendum.

Those same reports indicated that Renzi would resign but only to seek re-appointment with a broader majority within the current parliament.

A Cabinet reshuffle would also follow, together with a new voting law before general elections in the following year or 2018.

An auction of €1.5bn in 10-year Italian government debt was well-received, attracting a bid-to-cover ratio of 1.58, the highest since November 2015. The Treasury in Rome also sold €1.75bn of five-year debt and floating rate notes falling due in 2022 and 2024.