Spread yo-yos in early trading

Van Rompuy says high borrowing costs unjustified

Spread yo-yos in early trading

(ANSA) - Rome, September 5 - The spread between 10-year-old Italian bonds and the German benchmark yo-yoed in early trading on Wednesday. The spread, a barometer of Italy's borrowing costs, dropped to 422.8 basis points after the opening of business but then climbed back to 428, its closing level on Tuesday. The pressure has eased slightly on Italy bonds this week with the European Central Bank expected to announce plans to buy Spanish and Italian state paper on Thursday in order to lower those countries' high borrowing costs and ease the eurozone crisis. On Wednesday European Council President Herman Van Rompuy said the borrowing costs of some countries at the centre of the eurozone debt crisis, as shown in bond spread levels, does not reflect the economic reality of those states. "The spread levels of some countries is not always justified by the fundamentals (of their economies)," Van Rompuy said. Van Rompuy added that the EU gave "full support" to the ECB for it to carry out a "series of possible" actions to lower the borrowing costs. On Tuesday the Bank of Italy said the spread between 10-year Italian bonds and the German benchmark should be around 200 basis points, rather than its current level. The central bank said the reason it was so high was not down to fundamental weaknesses of the Italian economy but "contagion" from the eurozone crisis.

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