Rome

Spread see-saws on Italian government hopes

Letta optimistic but tough task

Spread see-saws on Italian government hopes

Rome, April 25 - Pressure on Italian bonds see-sawed Thursday amid cautious optimism that Italy is heading towards a new government. The spread between the 10-year Italian bond and the German benchmark, a key measure of Italy's borrowing costs and of investor confidence, rose to 289 basis points before falling to 285 with a yield of 4.09% Monday, compared to 297 at Friday's close. Giorgio Napolitano's re-election as president Saturday has boosted hopes Italy will soon have a government after two months of political deadlock following February's inconclusive general election. Napolitano handed a mandate to centre-left Democratic Party (PD) deputy head Enrico Letta Wednesday to try to form a left-right coalition government by Monday. Letta said he was optimistic but acknowledged it could be hard to reconcile the deeply divided PD and its arch-enemy, Silvio Berlusconi's conservative People of Freedom (PdL) party.

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