Italian and Spanish bond yields cool after record highs

Italian and Spanish bond yields have cooled in early trading after yesterday hitting their widest spread over German bunds since the inception of the euro.

The bonds reached record highs amid fears of contagion in the eurozone as the market starts to price in the possibility of a Greek sovereign debt default by the end of the year. Italian 10-year bonds are at 4.4% at 8.30am, cooling from the close of trading yesterday when they hit 5.7%, their highest level in ten years. Italian bond yields have been rising so fast there are concerns the country's banks will not be able to pass the European banking stress tests. Meanwhile, Spanish 10-year bonds are priced at 4.36%, after breaking the 6% barrier yesterday, hitting a high of 6.28%.