Italian and Spanish 10-year bonds drop

ITALIAN and Spanish 10-year bonds dropped yesterday, pushing yields up to euro-era records versus benchmark German bunds, on concern that slowing growth will hamper efforts to tame the nations’ debt loads.

German 10-year yields touched an eight-month low amid speculation spending cuts included in a US debt-limit compromise agreement will harm the global economy. Investors pared bets on higher euro-region borrowing costs as European producer-price inflation slowed for a second month.

“This has all the features of a self-fulfilling crisis,” said Harvinder Sian, a senior bond strategist at Royal Bank of Scotland in London. “The rise in yields looks pretty relentless, and it doesn’t look as if the politicians are anywhere near to getting ahead of the curve.”