European markets start to rebound after Italy's 'encouraging' bond auction

Political leaders in talks

The Italian government has succeeded in completing a "very encouraging" auction of €5.6bn worth of fresh bonds, showing investors still have appetite for the country's debt despite a weekend of political upheaval and yesterday's market slump.

Fears of a snap election in Italy as soon as August led to a sharp sell-off in Italian bonds and equities on Tuesday (29 May) and sent yields on two-year and five-year government bonds soaring, while contagion spread to global markets. Today's bond auction was seen as a test of investor confidence in Italy and was successful, although it means Italy will pay a notably higher yield of 2.32%, 2% and 3%, for five-year, seven-year and ten-year bonds respectively, according to the FT. Seema Shah, global investment strategist at Principal Global Investors, said the demand at the auction was...