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Italy Yield Tops 3%

Italian ten-year yields broke above 3 percent for the first time in nearly two months, slumped for the third day ahead of a budget meeting between the country’s populist leaders: Deputy Prime Ministers Matteo Salvini and Luigi Di Maio and the Finance Minister Giovanni Tria.

Yields on 10-year government debt rose as much as 19 basis points to 3.10 percent, with the spread over those on their German peers rising 20 basis points to 264 basis points. The yield on two-year securities climbed as much as 40 basis points to 1.38 percent.

As budget talks kicked off in Rome on Friday, the two parties in the ruling coalition pledged to start implementing their bold spending plans next year, risking putting Premier Giuseppe Conte’s cabinet on a collision course with European Union partners. A spike in the yield of Italy’s 2.3-trillion-euro ($2.7 trillion) public debt on 2018-08-03 (Friday) showed how closely markets will be following the talks.

“We have agreed on the economic and financial planning that will be presented in September,” Conte said in a statement after meeting with Tria, Deputy Premier and Five Star Movement leader Luigi Di Maio, Foreign Minister Enzo Moavero, Europe Minister Paolo Savona and Cabinet Undersecretary Giancarlo Giorgetti. Conte gave no details on budget figures.

The outcome of the meeting confirms that the government’s spending plans are “compatible” with current budget targets, Tria said in a statement.

Italy’s government is due to set new public-finance targets in late September, and to submit a draft budget to the European Union for review by October 15. The budget law will have to be finally approved by the Rome-based parliament by year-end.

After the meeting on 2018-08-03, Italian 10Y bond yield fall back to below 3% at 2.934%.

Reference

  1. Bloomberg, John Ainger, 2018-08-03, “Italy Yield Tops 3% Before Budget Meeting as Bonds Extend Slump”
  2. Bloomberg, Alessandro Speciale, Lorenzo Totaro and Chiara Albanese, 2018-08-05, “Italy Budget Talks Get Underway as Investors Serve Up Warning”
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