(REUTERS) - Long-dated Italian bonds were among the Eurozone's worst performers in 2011 as the sovereign debt crisis threatened to overwhelm the region's third largest economy.
The Markit iBoxx euro-denominated indices of total returns on government bonds show Italian debt with a maturity of more than 10 years posting a total year-to-date return of minus 11 percent, although bonds with a maturity of up to three years eked out a small gain of almost one percent.
A bond's total return is made up of the change in its price plus interest payments, assuming they are reinvested. Italian bond prices have fallen sharply since early July, with the 10-year benchmark trading at just 86 percent of face value.
Demand for liquid safe-haven assets due to the crisis pushed total returns on longer-dated German bonds (10 years plus) to 18 percent, while German bonds across the curve returned nine percent overall.
Non-Eurozone debt also benefited from the flight to quality, with U.S. Treasuries posting returns similar to Bunds in their local currency.
However, UK gilts were the clear outperformers with total year-to-date returns of 16 percent bolstered by the Bank of England's quantitative easing programme and the government's perceived fiscal prudence.
Among other Eurozone peripheral debt, Spanish bonds returned seven percent despite huge volatility throughout the year, while Irish paper was up 12 percent, benefiting from the view that Ireland has made greater strides than other bailed-out Eurozone economies in tackling its debt problems.