Sabato, 22 Settembre 2018
MILAN

Italy threatened with downgrade, bond rate soars

English
© ANSA

Milan, February 27 - Italy's borrowing costs soared
at a Treasury auction on Wednesday and Moody's threatened to
downgrade the country's credit rating after its general election
failed to produce a clear winner.
Pier Luigi Bersani's centre-left alliance came first in
Sunday and Monday's vote but it failed to win a working majority
in the Senate.
Wednesday's sale of five-year and 10-year BTP bonds was
seen as a key test of investor sentiment, with the country at
risk of being mired in prolonged political deadlock.
The interest rate on 10-year Italian bonds soared to 4.83%,
the highest level since October.
It was 4.17% at the last equivalent auction in January.
The rate on five-year bonds went up to 3.59%, compared to
2.94% at last month's auction.
The spread between the 10-year Italian bond and the German
benchmark held relatively stable despite the outcome of the
auction.
The spread stood at 345 basis points at around 12.30 local
time, one point higher than its closing level on Tuesday.
The spread, a key measure of Italy's borrowing costs, had
fallen to 340 before the auction, having gained over 50 points
on Tuesday when the election result became clear.
Italy was at the centre of the eurozone debt crisis and it
looked in danger of plunging into a Greek-style meltdown in 2011
before reforms and austerity measures passed by outgoing Premier
Mario Monti's emergency government of unelected technocrats
eased the pressure.
There are fears that the uncertain situation in Italy could
reignite problems for the whole eurozone.
Moody's has said the country's credit rating is under
threat.
"We would consider downgrading Italy's government debt
rating in the event of additional material deterioration in the
country's economic prospects or difficulties in implementing
reform," Moody's said.
"A deterioration in funding conditions as a result of new,
substantial domestic economic and financial shocks from the euro
area debt crisis would also place downward pressure on Italy's
rating."
Moody's gave Italy's long-term debt a rating of Baa2, two
notches above junk status, in July 2012, when it said there were
risks that Monti's policies may not continue.
Another rating agency, Standard & Poor's, said the election
outcome would not immediately affect Italy's sovereign rating,
while stressing that it could in the future.
Meanwhile, the risk level of Italian bonds, as measured by
credit-default swaps (CDS) insuring them, climbed above that of
Spain's on Wednesday.
The Italian CDS level rose to 291 basis points, compared
to 290 for those of Spain, which has also been battling with a
financial crisis.
The spread between 10-year Italian and Spanish bonds,
another measure of investor confidence, remained in Italy's
favour, although it dropped to 45 basis points, the lowest level
since May 2012.

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