Peripheral bond yields rise amid political turmoil

Politics have captured the limelight over the past month. Bond yields in Italy have risen sharply over the past few weeks as concerns about debt sustainability and the new government’s commitment to the euro have mounted. Italian 10-year bond yields are now close to 3%, around their highest level since early 2014. Combined with events in Spain which led to the downfall of the government there, political turmoil pulled yields across the periphery higher. However, even in Spain yields remain lower than they were at this time last year.