* Eurozone Periphery Government Bond Yields tmsnrt.rs/2ii2Bqr
LONDON, June 14 (Reuters) – Italy’s 10-year sovereign borrowing costs were stuck at nearly eight-week low on Monday as the European Central Bank was in no rush to cut emergency stimulus measures aggressive supported by comments from its president.
The euro area economy is at a crossroads, but its recovery must be firm and sustainable before the central bank can debate the recovery of emergency aid, ECB President Christine Lagarde told Politico in an interview.
The ECB agreed last week to maintain a high pace of bond purchases to keep borrowing costs ultra-low and policymakers have not asked about the decline in support, even as economy rebounds from COVID-19 shock.
This backdrop has supported eurozone bond markets in recent days, allowing rates to fall further.
Italy, one of the main beneficiaries of ECB bond purchases, has led the way.
Its 10-year bond yield hit 0.74% in Monday morning trading, its lowest level in nearly eight weeks.
Rainer Guntermann, rate strategist at Commerzbank, said a more favorable economic outlook for Italy, where the central bank revised its growth outlook for 2021 up to nearly 5% on Friday, was also boosting sentiment.
“BTP (Italian bonds) continue to outperform, helped by optimistic GDP forecasts from the Bank of Italy on Friday, and 10-year BTP-Bund spreads flirt with the 100bp level, February lows at 90 bp also being in sight, “he said.
The closely watched spread between Italian and German 10-year bond yields was 102 basis points on Monday.
Most 10-year bond yields were flat but held near recent lows – the benchmark German 10-year bond yield was -0.28%, around 1bp from the multi-week lows reached on Friday.
The market spotlight was also on the European Union, which is expected to issue its first bond to raise funds for the 800 billion euros ($ 968 billion) Post-COVID Stimulus Fund as early as this week.
The EU is on track to become one of the world’s largest issuers with € 80 billion in stimulus fund bonds sold this year.
Most analysts expect the EU to start with a 10-year bond with a volume of around € 11 billion. ($ 1 = 0.8261 euros) (Reporting by Dhara Ranasinghe; Editing by Emelia Sithole-Matarise)