Eurozone bond yields rise again despite ECB buying

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European government bond yields mostly continued to rise Wednesday, even as the European Central Bank apparently ramped up purchases to try to calm investors.

The jump in interest rates in recent days signals a further spreading of the debt-crisis contagion from Italy to other countries, as investors grow increasingly fearful about governments’ abilities to pay their debts.

The ECB’s purchases did help push Italian bond yields modestly lower. The 10-year Italian bond slipped to 7.00% from 7.07% on Tuesday.

But 10-year bond yields rose in France, Spain, Austria and Finland. The French 10-year yield edged up to 3.71%, the highest since April, from 3.68% on Tuesday.

Market yields rise as bond prices fall. Over the last week, nervous investors have been dumping Eurozone bonds, even those of countries still rated AAA, such as France and Austria.

Financial markets have been looking to the European Central Bank to halt the contagion. In theory, the ECB could commit to buying unlimited quantities of bonds to try to hold down rates. But the bank has seemed reluctant to act aggressively, and Germany and France apparently are clashing over how big a role the ECB should play.

Separately, Reuters reported that the head of Italian banking giant UniCredit had urged the ECB to increase access to borrowing for Italian banks, pointing up funding issues for the lenders.

The euro currency slipped for a third day, off 0.1% to $1.353. The euro has tumbled from $1.42 three weeks ago.

European stock markets rallied off their lows for the day, closing higher after two days of losses. The Italian market rose 0.8%, French stocks rose 0.5% and the Swiss market added 0.4%.

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-- Tom Petruno