Europe's peripheral bonds get lifeline from EU deal

Brussels

IT'S BEEN a while coming, but Europe's peripheral bonds, most notably Italy's, finally look to have some good news from governments, not just the European Central Bank.

The government bonds of the region's most indebted countries may have a strong start to the week after European Union finance ministers agreed on a 540 billion euro (S$834.5 billion) package of measures to combat the economic fallout from the coronavirus. The deal, after days of negotiation, looks set to help yield premiums across the region tighten.

"It's a good signal they have agreed on a set of measures," said Luca Cazzulani, senior fixed income strategist at UniCredit SpA. "The market should react to the good news but the measures are broadly as expected."

Still, the package falls short of what Italian politicians have been calling for - the issuance of so-called coronabonds, which would be jointly issued debt by governments across the region. The current measures also need to be approved by leaders as early as this week, with divisions still remaining.

Otherwise, the week is set to be a broadly quiet one after the Easter holiday, with just a handful of economic data releases and modest bond supply. And the ECB's pandemic bond-buying programme is set to keep yield rises capped. BLOOMBERG