Italy leads eurozone bond rally

Italy led a rally in euro zone bond markets on Thursday, with 10-year Italian bond yields hitting four-month lows on growing confidence the ECB will keep monetary policy easy for longer to protect the economy from the fallout of coronavirus.

Bond yields across the bloc tumbled after the Chinese province at the epicentre of the coronavirus outbreak reported a record rise in the death toll under a new diagnostic method, that effectively lowers the bar for classifying new infections.

Italy's 10-year bond yield tumbled as much as six basis points to around 0.86%, narrowing the gap over safer German Bund yields to around 125 basis points - levels last seen in May 2018, just before a political crisis in Italy sparked a sharp sell off in its debt.

The bond rally eased later in the session following UK government bond yields, which rose after finance minister Sajid Javid resigned and his replacement, Rishi Sunak, was expected to pave the way for a more expansionary budget next month.

Italy's 10-year yield was down 2 basis points at 0.90% in late trade.

Germany's benchmark 10-year Bund yield was last down 1 basis point at -0.39%.