* Italian yields stable near eight-year lows
* Renzi forces Letta to resign as Italy’s prime minister
* Markets view Renzi as “positive change”
By Marius Zaharia and Joshua Franklin
LONDON, Feb 14 (Reuters) - Italian bond yields held near eight-year lows on Friday as investors warmed to the prospect of centre-left leader Matteo Renzi taking over as prime minister from low-key party rival Enrico Letta.
Letta plans to tender his resignation to President Giorgio Napolitano on Friday after his Democratic Party supported Renzi’s call for a new, more “ambitious” government. Napolitano is then expected to call on Renzi to form a new administration.
Renzi has criticised Letta for failing to introduce growth-boosting reforms as Italy lagged an economic rebound in peripheral peers Spain, Portugal and Ireland. Rome badly needs to improve its growth prospects to curb a 2 trillion euro debt pile, which is roughly 1.3 times its economic output.
Investors seemed to take the news well, with 10-year Italian yields stable at 3.72 percent, about 6 basis points above an eight-year low hit earlier this week. They traded around 3.78 percent before Renzi proposed the leadership change to his party late on Thursday.
“The appointment of Renzi is seen as something positive. He is a new politician who can take decisive action,” BNP Paribas rate strategist Patrick Jacq said.
“He looks like he has a stronger support from the majority and he is more able to conduct structural reforms... This is not political uncertainty. In fact, the political situation in Italy now is clearer.”
One trader said any dip in Italian bond prices was a buying opportunity for him as he saw the leadership change as “medium-term positive.”
Also supportive for low-rated euro zone debt, and negative for top-ranked bonds, was above-expectations fourth-quarter economic growth data from France and Germany. Figures for the euro zone as a whole are due at 1000 GMT.
German 10-year Bund yields, the euro zone’s benchmark, were up slightly at 1.682 percent.
Renzi is due to lead Italy’s third administration in a year and his coalition partner, the New Centre Right Party, said it did not expect him to last a full term until 2018.
The unstable political backdrop has been one of the factors to blame for Italian yields trading above their Spanish peers.
Spanish Prime Minister Mariano Rajoy has survived a corruption scandal in his party and has been able to push through reforms that have improved economic indicators beyond market expectations.
But for some, Renzi brings renewed hope.
“A couple of years ago in the middle of the debt crisis when we had political problems it was putting significant upward pressure on yields,” ICAP strategist Philip Tyson said.
“Based on what’s gone on in the past, you have to question whether this will be sustainable also. But I think the market’s viewing it from the point of view that, of anybody available at the moment, he offers the most potential.”
Moody’s Investor Service is due to review Italy’s credit rating on Friday, in accordance with new European regulations obliging ratings agencies to publish a calendar of when they might adjust their views on sovereigns.
Analysts do no expect any change in Italy’s ratings or outlook and the agency may not make any announcement if it decides to maintain the status quo.
Moody’s rates Italy Baa2, while Standard & Poor’s ranks it BBB and Fitch has it on BBB+, all with a negative outlook and citing political fragility as one of the factors weighing on its ratings.