With investors turning against Turkey, the government in Rome is trying to avoid Italy being next in line. Italy has had contacts with the ECB to discuss the risk of a speculative attack on its debt, a person familiar with the situation said earlier on Monday.
Deputy Prime Minister Luigi Di Maio sought to tamp down concerns of a selloff. “I don’t see a real risk that this government will be attacked, it’s more a wish of the opposition,” Di Maio said in an interview with newspaper Corriere della Sera.
“All know the fence that protects the prey will soon be lifted and the financial speculation easily sees the periphery’s debt as an easy target and is positioning itself ahead of the next developments,” lawmaker Borghi said. "It is significant that an external event like Turkey that has nothing to do with Italy unleashes such an effect.”
Italian bond yields are an outlier within the Eurozone not least because the populist government has been signalling it wants to break the ECB’s fiscal deficit rules and its bonds have been punished accordingly.
The reality of the bond market has been brought to bear on all of the firebrand politicians that have made it into power in placed like Greece and Italy. I think everyone is wondering how long it will take Turkey to get the message.
The ECB appears intent on ending its quantitative easing program next month and that means a fresh source of demand will need to be found for Eurozone government debt. That is particularly worrisome for Italy where the banking sector is still in a state of disrepair and the populist regime has big plans for fiscal spending. The
The 10-year BTP yield has first step above the base characteristics and a sustained move back below 2.3% would be required to question potential for additional expansion.Back to top