Italian yields hit 2-week highs with 30-year BTP sale in focus

* Euro zone periphery govt bond yields tmsnrt.rs/2ii2Bqr

LONDON, Oct 22 (Reuters) – Italian yields rose to a two-week high while core European government bond yields were stable on Thursday as hopes of a U.S. fiscal stimulus package persisted.

Eyes will be today on Italy’s 30-year bond sale, said ING analysts. The announcement that Italy will offer a new 30-year BTP bond due on Sept. 1, 2051 came out on Wednesday.

Italy’s rating is also due to be reviewed by the credit rating agency S&P on Friday and this “could add to unease as government finances are stressed,” ING analysts said in a note.

Italy is rated BBB with negative outlook, a one-notch downgrade would leave Italy’s rating just above a feared junk rating.

Traders will also be focusing on the U.S. initial jobless claims later in the day and on the last U.S. president debate ahead of the election on Nov. 3.

Democrat Joe Biden still leads the polls and that’s why “markets very likely have set their eyes on the real prize already in terms of fiscal stimulus when Democrats get to power,” ING said.

“Talks surrounding more U.S. near-term fiscal stimulus adds noise to the U.S. Treasury yields,” they said.

Noise or not, hopes of a stimulus pushed U.S. yields and their European counterparts higher on Wednesday.

U.S. House Speaker Nancy Pelosi said there was still a chance for a deal on fresh COVID-19 relief despite resistance from Senate Republicans, though she acknowledged it might not pass until after the election.

On Thursday, benchmark German 10-year Bund yield was flat at -0.58%, but close to the -0.56% high it reached the day before, the highest since Oct. 14.

Italian 10-year BTP yield rose 1.2 basis points to 0.792%, a two-week high. Yields across older maturities were more subdued, though the 30-year yield also rose to a two-week high of 1.692%.

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