There are still questions about the plan, notably over how the EFSF euro rescue fund will be leveraged and the meeting of the Group of 20 is expected to reveal little support from countries such as China or Japan for its special purpose
vehicle.
"Markets are in a risk off mode again because there are a lot of worries that Europe's politicians won't get too much help from the rest of the G20 states regarding money for the EFSF," said Christian Reicherter, analyst at DZ Bank.
The Italian/German 10-year government bond yield spread widened by some 30 bps to 410 bps, nearing euro era highs and the 2/10 year Italian yield curve flattened around 10 basis points to the least in a month.
"The worrying sign is the front-end of the curves coming under pressure as they price in the increasing risk of a credit event," Rabobank rate strategist Richard McGuire said. "Clearly last week's summit has only had a transitory impact."
Cash 10-year Italian yields rose above 6 percent -- despite traders saying the ECB was buying Italian and Spanish debt in ets -- trading at levels last seen before the central bank resumed its bond purchasing programme.
ING strategists recommended new long positions in Italian 10-year paper at these levels, on the view that the ECB would cap the rise in yields. DZ Bank's Reicherter said it was safer to wait until the ECB's meeting on Thursday to assess how open the bank is to stepping up its purchases under its new Italian chief Mario Draghi.
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