(Bloomberg) -- Italian bonds slumped after the European Commission slashed its economic-growth forecast for the nation, adding to concern over Rome’s fiscal plans. The euro fell to a two-week low.
Yields on 10-year debt surged to the highest level in a month after the European Union’s executive arm cut the expansion estimate for the year to 0.2 percent from 1.2 percent previously, while also lowering the projection for Germany to 1.1 percent from 1.8 percent. German bund yields touched this year’s lowest level in response.
“This is short-term bad for Italian bonds,” said Jens Peter Sorensen, chief analyst at Danske Bank A/S. “When in doubt, buy bunds.”
Italian 10-year yields climbed as much as 10 basis points to 2.96 percent, the highest level since Jan. 9. Those on German bunds dropped three basis points to 0.13 percent, the lowest level since Nov. 2016. The euro slipped by as much as 0.3 percent to $1.1332, the weakest level since Jan. 25.
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