Italian government bonds outperformed the broader euro zone market on Monday, with yields dropping by as much as 12 basis points after Fitch affirmed Italy's credit rating at BBB. President Donald Trump's delaying of an increase in US tariffs on Chinese goods following "productive" trade talks also boosted support for riskier assets and saw German government bond yields pull away from last week's lows.
The rally in Italian government bond yields cancelled out a sell-off on Friday ahead of Fitch's review.
Italy's 10-year government bond yield was down nine basis points at 2.765 percent, having touched a low of 2.75 percent, which had pushed its spread over higher rated Germany to a three-week low of 259.5 basis points.
Short-end Italian government bonds also outperformed with two- and five-year yields last down 12 basis points to 0.41 percent and 1.715 percent respectively.
Germany's 10-year government bond yield, the benchmark for the region, was up a basis points to 0.11 percent, while other 10-year yields in the bloc were flat to slightly higher on the day.
Fitch affirmed Italy's rating with a negative outlook to reflect "the extremely high level of general government debt and the absence of structural fiscal adjustment" as well as "uncertainty arising from the current political dynamic."
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