Risk Aversion Hits Eurozone Bonds

Borrowing rates for southern eurozone nations pushed higher Monday as the crisis in Turkey dampened appetite for risk among investors who were also keeping a wary eye on Italy.

The crash in the value of the lira has reverberated far beyond Turkey as investors have fled other emerging market currencies in favor of safer assets, while the shares of European banks with units in Turkey have taken a lashing.

The aversion to risk has also begun to be felt in the borrowing costs of southern eurozone nations, in particular Italy where a populist governing coalition is preparing its first budget.

Deputy Prime Minister Luigi Di Maio, in an interview with the Corriere della Sera daily, called on Europe to allow the country to pursue reforms that would boost the economy and reduce debt.

He said that in any case after European elections next year "we will be finished with the austerity era and we'll begin a seven-year period of rising budgets."

At 1210 GMT the rate of return for investors on 10-year Italian government bonds in trading in the secondary markets rose to 3.082 percent from 2.993 percent on Friday.

The yield on 10-year Spanish bonds climbed to 1.505 percent from 1.407 percent, while those on Portugal's 10-year bonds rose to 1.864 percent from 1.778 percent.

Meanwhile, the yield on 10-year German government bonds, which are the benchmark in the eurozone and are safe-haven asset, dropped to 0.308 percent from 0.317 percent.

The yield on similar maturity French bonds climbed to 0.684 percent from 0.670 percent.