(Bloomberg) -- Italy’s bonds surged after Deputy Prime Minister Matteo Salvini said that he would be willing to talk to French and German leaders to try to secure a higher deficit ceiling.
The more conciliatory comments prompted a rally in Italian bond futures, which was exacerbated as traders raced to cover short positions, according to London-based traders. Salvini is hoping to secure a large increase in seats in European Union elections this week, which could give him more policy leverage in Rome and Brussels.
Ten-year yields fell as much as nine basis points to 2.55%, the lowest level in over two weeks. Those on two-year bonds dropped 10 basis points to 0.47%. The potential for another battle with the EU over the budget deficit has weighed on the debt in recent weeks, with Salvini saying a flat tax will be a priority if his League party wins the European elections.
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