Italian assets slump again

Bloomberg

Italian assets were pummeled again on mounting concern over the populist coalition’s fiscal plans, with the moves rippling across European debt markets. Bond yields climbed to the highest levels in almost three years, while the premium to cover a default in the nation’s debt was the stiffest since October. The local benchmark stock index dropped for a second day, while the euro weakened to its lowest level this year as investors fret the anti-establishment parties’ proposal to issue short-term credit notes — so-called “mini-BOTs” — will lead to increased borrowing in what is already one of Europe’s most indebted economies.
After overlooking an inconclusive election result in March, investors are now pushing Italian risk premiums higher. Bond yields surged last week on concern that the populist parties would seek a debt writedown, which has now been accentuated by fears of what mini-BOTs mean for the third-biggest economy in the euro zone.
“The market will remain on somewhat of a knife edge as regards the intended plans and as the coalition government itself evolves,” Rabobank International strategists led by Richard McGuire wrote in a note.