Wealth Manager - the site for professional investment managers

Register to get unlimited access to Citywire’s fund manager database. Registration is free and only takes a minute.

Italy on the brink as bond yields surge to 7.4%

Italy on the brink as bond yields surge to 7.4%

The situation in Italy has grown increasingly precarious with the yield on bonds passing the level which suggests the nation will need to be bailed out.

At 10.50am the yield on the 10-year benchmark stood at 7.419%, a massive 0.7% jump on the day.

History suggests that Italy could be the next European nation to be bailed out with Portugal, Greece and Ireland all receiving their rescue packages shortly after yields on their 10-year bonds passed 7%.  

The rise of the yield on the one year bond was equally startling, rising by 3.921% today to stand at 10.368%  Meanwhile the yield on five year bonds was 0.937% higher at 7.683%  

Reports suggest today's rise in yields was triggered by London clearing house LCH demanding more collateral from investors who buy and sell Italian debt.

News that Italian prime minister Silvio Berlusconi is to stand down once he has pushed through country's Budget has done little to ease the tension in Italy.

His resignation increases the chances of early elections in Italy. The approval of the Budget, which could up to two weeks, should include structural measures required by EU leaders said Italian president Giorgio Napolitano.   

However, analysts believe this leaves Italy with little time to push through the required reforms.

Two weeks is too short a time to approve comprehensive measures as required by EU partners, in particular those related to the labour market, privatisations and liberalisation. As also suggested in a letter sent to Italy by the European Commission, the plan presented to the EU summit lacks details about timing and the implementation of key measures,' Barclays Capital's Nick Verdi said,

'Even assuming that the government approves in the next two weeks all of the measures presented by Italy at the EU Summit as they stand, we think that the incoming new government would be still asked by the EU authorities to make the same adjustments and clarification raised already with the outgoing Berlusconi government to ensure that the reform demands from Brussels are met fully.

'This could possibly have the effect of further delaying the implementation of much-needed structural reforms.'  

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Taxicab Tenner: AXA IM's Nicolas Trindade

Taxicab Tenner: AXA IM's Nicolas Trindade

After a summer break, it is the turn of AXA Investment Manager's Nicolas Trindade to give a £10 view of how fixed income is faring.

Play Wealth Manager Olympics: the Relay

Wealth Manager Olympics: the Relay

In the final round of the Wealth Manager Olympics, our intrepid athletes team up for the relay.

Play Wealth Manager Olympics: the Shot Put

Wealth Manager Olympics: the Shot Put

After busting a gut in the 100m sprint, our wealth manager Olympians displayed their brute strength in the shot-put.

Read More
Your Business: Cover Star Club

Profile: gearing up for the shift from consolidation to start-ups

Profile: gearing up for the shift from consolidation to start-ups

‘I think the industry is evolving rapidly, but not necessarily as a whole,’ says the head of recently launched Charles Nicholson AM

Wealth Manager on Twitter