The yield premium investors demand to hold Italian 10-year bonds over their German peers narrowed to the least in three years on bets the European Central Bank will take further action to combat low inflation.
Bonds linked to U.K. inflation are beating all but one of their developed-market peers this year, a sign investors see price increases accelerating from the slowest pace since 2009 as the economy gathers strength.
The pound advanced for a second week versus the dollar after the U.K. jobless rate unexpectedly fell below 7 percent, the threshold the Bank of England has set to start considering raising interest rates.
European government bonds advanced this week, with Italian and Irish yields falling to the lowest levels on record, as prospects of further European Central Bank stimulus fueled demand for the region’s debt securities.
The pound rose to the highest level in more than four years against the dollar as Federal Reserve Chair Janet Yellen signaled the U.S. central bank will keep an accommodative monetary policy that has weakened the greenback.
The pound approached a four-year high against the dollar after the U.K. unemployment rate fell more in the three months through February than analysts forecast, adding to signs the economy is gaining traction.
Sweden’s krona declined to the weakest level in almost two years against the euro amid speculation the nation’s central bank will cut interest rates at least once this year, damping demand for the currency.