A clear commitment to the euro and a pledge to avoid financial instability from Italy’s new finance minister has spurred a sharp rally in the country’s bonds and shares
Source: Financial Times – Heavy demand for country’s two-year government debt is taking the yield on it down by over half a percentage point to 1.172 per cent, taking it further from the high of 2.731 per cent it hit at the height of the uncertainty during the composition of the populist coalition government. The benchmark 10-year yield is also significantly lower — by almost 0.26 percentage points at 2.873 per cent — as investors buy back into the paper. It marched as high as 3.388 per cent last month. Yields fall when prices rise. Milan’s FTSE MIB stock gauge is powering ahead of its peers — up 2.3 per cent, compared with a 0.5 per cent gain for the Europe-wide Stoxx 600 and a rise of the same margin for Frankfurt’s Xetra Dax 30. Italian banks, which are some of the main holders of the country’s debt, are leading the rally. UniCredit’s stock is up by over 5 per cent. UBI Banca is up by almost 4 per cent. Giovanni Tria, the finance minister, told Corriere della Sera, the Italian daily, in remarks published on Sunday: We are not discussing any proposal to exit the euro. The government is determined to avoid the materialisation of market conditions that push us towards an exit in any way. Mr Tria, an economic policy professor by background, also spoke of the government’s commitment to reducing the country’s debt level, which has reached more than 130 per cent of gross domestic product: This is one of the government’s explicit goals . . . there should be no doubts. We are not focused on keeping our accounts in order and bringing down the debt because of what Europe tells us, but because we should not undermine trust in our financial stability. Investors hailed the shift in Italian asset prices as signs that the market was beginning to calm down after the past month’s turbulence
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