June 13, 2018 / 6:45 AM / 2 months ago

Italian bond yields drop as League's Savona says euro is "indispensable"

LONDON, June 13 (Reuters) - Italy’s borrowing costs dropped sharply on Wednesday after the country’s new EU Affairs Minister Paolo Savona said the euro was “indispensable” and denied he ever suggested leaving the single currency.

Italy’s two-year government bond yield dropped below 1 percent and was down 10 basis points at 0.94 percent.

The yield on the benchmark 10-year government bond was 5 bps lower at 2.82 percent, while the closely-watched spread over German yields was at 234 basis points, well below the 268 bps level at the start of the week.

The 81-year old Savona has previously expressed hostile views on the euro, including saying Italy’s decision to join was a “historic mistake”. He had initially been tapped to be economy minister by the anti-establishment coalition, sparking a market selloff. His appointment was later vetoed.

But in a meeting with foreign press on Tuesday, Savona was at pains to stress he fully backed the euro and did not want to prepare for Italy to quit the single currency. (Reporting by Abhinav Ramnarayan; editing by Sujata Rao)

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