Italian bond yields drop 5-8 bps after S&P ratings boost

LONDON, Oct 26 (Reuters) - Italian government bond yields dropped between five and eight basis points across the curve on Monday after ratings agency S&P Global unexpectedly lifted the country's ratings outlook to stable from negative late on Friday.

The decision removes the possibility of a near-term downgrade from BBB to BBB-, which would have put the country within one notch of a "junk" rating.

On Monday, the first day of trading after the decision, Italy's benchmark 10-year yields fell 8 bps to 0.685% , while the closely-watched spread over Germany tightened to 126.6 bps.

(Reporting by Abhinav Ramnarayan, editing by Lawrence White)

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