Bond yields drop on Italy and local merger

Greek 10-year government bond yields on Monday saw their biggest one-day fall since September after a strong rally in Italian bonds helped boost support for peripheral assets.

Analysts also attributed the move to a boost for Eurobank, Greece's third-largest lender, on news it will acquire real estate company Grivalia Properties.

"The move in Greek government bonds is mostly to do with the Italy rally, but there are also some idiosyncratic reasons for it," said ING strategist Martin van Vliet. "There was good news on Greek public finances recently and more importantly, Greek banks are up [on Monday] on the Eurobank merger news. Investors are very keen to see some consolidation in the sector," he added.

Greece's 10-year government bond yield fell as much as 17.5 basis points to 4.38 percent, its lowest level in two-weeks.

Greek five-year government...