LONDON, Dec 19 (Reuters) - Italian government bond yields tumbled on Wednesday, narrowing the gap over safer German debt yields, after an Italian official said that Rome had struck a deal with the EU Commission over the 2019 budget.
The news, which broke late Tuesday, signals an end to weeks of wrangling that had shaken bond markets. A source in Prime Minister Giuseppe Conte’s office said a deal was not expected to be formalised until a meeting of EU commissioners on Wednesday.
Italian bond yields were down as much as 11 basis points in early trade. Five-year Italian bond yields fell to around 1.87 percent, the lowest since late September.
The Italian/German 10-year bond yield gap narrowed to around 256 bps, the tightest since late September. That spread stood at 268 bps in late Tuesday trade.
Reporting by Dhara Ranasinghe, Editing by Helen Reid