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By Bloomberg

Italian government notes advanced for a third day amid speculation the European Central Bank is preparing to intensify its stimulus program to revive inflation and boost the economy.

Spanish securities held a gain before ECB policy makers including Executive Board member Benoit Coeure and Bundesbank President Jens Weidmann speak in Paris today. President Mario Draghi said yesterday officials were unanimous in their willingness to introduce further measures if needed and that the ECB’s balance sheet would expand toward its March 2012 level. That sparked bets the institution will widen its stimulus plan to include buying corporate or government debt.

“A dovish tone at the ECB meeting kept the periphery well bid,” strategists led by Michael Rottman, head of fixed-income research at UniCredit SpA in Munich, wrote in an e-mailed note. “We expect markets to continue being driven by ECB rhetoric, with risky assets favored.”

Italy’s two-year yield fell two basis points, or 0.02 percentage point, to 0.65 percent at 8:53 a.m. London time after dropping four basis points yesterday. The 1.5 percent note due in December 2016 climbed 0.045, or 45 euro cents per 1,000-euro ($1,239) face amount, to 101.76.

The rates on the nation’s 10-year debt and equivalent- maturity Spanish bonds were little changed at 2.38 percent and 2.16 percent, respectively.

The ECB’s balance sheet now stands at 2.05 trillion euros. It expanded to more than 3 trillion euros in March 2012, before peaking at 3.1 trillion euros in June that year. The central bank, which has already started purchases of covered bonds, is set to begin buying asset-backed securities this year.

“These asset purchases will have a sizable impact on our balance sheet, which is expected to move towards the dimensions it had at the beginning of 2012,” Draghi said yesterday after the ECB kept interest rates at record lows.

German 10-year bunds were little changed, yielding 0.84 percent. The securities returned 8 percent this year through yesterday, Bloomberg World Bond Indexes show. Spain’s earned 13 percent, and Italy’s 12 percent.