Yields and basis point movements of some of the most-watched 10-year bonds this afternoon:

UK: 1.77% (+5.0bp)
US: 1.74% (+2.8bp)
Germany: 1.5% (+2.7bp)
France: 2.20% (-3.4bp)
Spain: 5.81% (-1.7bp)
Italy: 5.11% (-0.2bp)

[There are 100 basis points to a percentage point]

Bonds in the UK, US and Germany declined on Wednesday but gained in France, Spain and Italy. Italian bond yields fell today after the country's Prime Minister sought to ease harsh austerity measures imposed by himself when he took office in November 2011.

Italian Prime Minister Mario Monti unexpectedly lowered taxes today on the lower two income tax bands. The Italian government also said that it would raise the value-added tax by only one percentage point in order to meet budget goals agreed with the European Union, assuring that it will balance its budget in structural terms next year. This was less than planned two percentage point-hike.

Borrowing rates rose at an Italian short-term bond auction earlier in the day, though demand was firmer. Talking to The Telegraph about the debt sale, Nicholas Spiro of Spiro Sovereign Strategy said: "Italian sovereign debt continues to benefit from a more credible ECB-backed fiscal backstop and investors' willingness to differentiate more between Spain and Italy.

"However, today's sale, with a slight uptick in yields, is a reminder that Italy is by no means out of the woods. Although demand held firm, the fact that yields rose at a sale of short-dated paper is concerning and underscores the fragility of investor sentiment."

French 10-year bond yields fell today as investors bought the securities before existing debt matures this month, according to Bloomberg.

Meanwhile, US 10-year Treasury yields rose to their highest level in more than two weeks ahead of a debt sale later in the session. The US will sell $21bn of 10-year notes, as part of a $66bn issuance this week.

BC

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