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As represented by the spread between Italy and German 10-year bond yields, the Italian risk premium fell on Wednesday, as the European Central Bank’s former pro-EU chief Mario Draghi accepted a mandate to try to form a new Italian government. 

The spread fell by eight basis points to 106 basis points as investors cheered the idea of having a banker-led government. Draghi headed the ECB through the worst of the Eurozone’s debt crisis in 2012 when he assured markets that the central bank would do “whatever it takes” to keep the bloc together. 

A continued decline in the Italian risk premium may put a bid under the common currency.