Italy's 10-Year Bonds Yield Reached 2.06% Amid Political Outbreak
Yesterday, the yield of 10-year bonds of Italy reached the level of 2.067%, rising by 12 basis points. This is the largest one-day movement since July 2017. The 2-year was up 17 bps to 0.11%. Meanwhile, the spread between German and Italian 10-year bond yields, an indicator of financial stress in the Eurozone, was up 129 bps to 144 bps. So the market reacted to the possibility of writing off the state debt of the country.
Earlier it became known that the Italian parliamentarians are discussing the possibility of demanding the European Central Bank to write off the Italian debt of 250 billion euros. The abolition of debt was not the only blow to the European establishment. The League of the North Party intends to cancel the agreement on financial stability.
Last year, European markets were extremely resistant to political risks, including elections in France and Germany, as well as the Catalan political crisis in Spain. But the political outbreak in Italy occurs at a time when the ECB is trying to get out of its bond purchase program and take the first steps towards normalizing interest rates, even though the region's economic recovery shows signs of interruption.