BTPs Rocked on Rumuours that Finance Minister Tria may be forced to step down

Italian bonds have been benefited from the placing of “carry” trades, where investors sell lower-yielding assets in favour of those with higher coupons.  Italian bonds offer some of the highest yields in the Euro area.

Now, Italian bonds rocked again!  Some of the moves in the bond market could have been exacerbated by quiet summer.

The premium that benchmark 10-year notes offer over similar-dated German Bunds widened three basis points to 220 basis points.

This is because La Repubblica reported that the country’s populist leaders were united in battle against Tria over nominations for leadership of state lender GDP.  Five Star Movement leader Luigi Di Maio and League chief Matteo Salvini were said to have “threaten unofficially to use the weapon of seeking Giovanni Tria’s resignation”.

Under Italian Law, even the Prime Minister can’t fire government ministers, however, a rift between the key political figures in the government and the Finance Chief could lead to a gridlock.

Source:

Bloomberg, 2018-07-20, John Ainger, “Italian Markets Rattled After Tria’s Future Is Thrown Into Doubt”