Italian bond yields higher again

There was another leg higher in Italian bond yields yesterday as the market continues to come to the terms with the prospect of a governing coalition of the anti-establishment Five Star and the far-right League. In particular, 10-year yields rose by 16bps to 2.38% (a 3-year high), taking the cumulative increase to 50bps in a little over a week.  There was also move to the safety of German bonds, with 10-year yields ending the day about 6bps lower at 0.53% (following a similar decline last Friday)

The euro continued to lose ground against the dollar for a time yesterday, falling to almost $1.17 at one point before staging a mini-rally. It is managing to hold onto most of those gains and is currently trading at around $1.1760

Sterling is a touch softer against both the euro and the dollar, trading at just over 87.5p and $1.34 respectively. Members of the Bank of England’s Monetary Policy Committee (MPC), including Governor Carney, will discuss its recent inflation report with Parliament’s Treasury Committee later this morning. Though it kept interest rates at 0.5%  at this month’s meeting, the MPC did indicate limited rate hikes ahead

Two Fed members (Bostic and Harker) yesterday said they expected inflation in the US to rise above its 2% target for a time. They aren’t particularly concerned about that prospect though, with both saying it’s appropriate to continuing gradually raising interest rates

Very quiet on the data front today with little or nothing of note due