Italian 10-year bond yield drops to lowest since March

• Italy's 10-year government bond yield fell to 2.5-month lows on Monday. 
• German 10-year yield also declined to four-week lows. 
• Hopes of de-escalation between Germany's top court and the ECB likely pushed yields lower.

Italian government bond yields on Monday fell to the lowest level since March, leading the decline in borrowing costs across the Eurozone, seemingly on hopes of de-escalation between Germany's top court and the European Central Bank (ECB). 

The yield on Italy's 10-year government slipped to 1.24% to hit the lowest level since March 30. Meanwhile, the German 10-year bond yield declined to -0.50%, a level last seen on May 22.

Bonds picked up a bid, sending yields lower after sources said the appointment of a new President at the Constitutional Court could facilitate the easing of tensions with the ECB. 

Germany's constitutional court shocked Europe last month when it asked the ECB to justify bond purchases under its stimulus program or lose the Bundesbank as a participant, forcing markets to consider the possibility of an early end or downsizing of the QE program. 

And yet that wasn't the only reason for the decline in yields on Monday. The resurgent coronavirus fears likely boosted haven flows into government bonds, pushing yields lower. Notably, the uptick in the German infection rate caused by an outbreak among abattoir employees sparked debate about working conditions in its meat processing industry.