Ireland insulated as Italy’s bond yield jumps

Italy’s bonds and stocks slumped as the Five Star Movement and the League reached a coalition agreement to govern the country, outlining proposals that may pressure public finances. 

Irish costs of borrowing have so far not been affected.

Luigi Di Maio, leader of Italy’s Eurosceptic 5-Star Movement

Benchmark 10-year Italian yields touched the highest level in almost a year, while the local share index slumped to the lowest in a month. 

The accord between the nation’s populist leaders aims to ramp up spending on the poor and slash taxes in a direct challenge to the EU. 

The parties still haven’t said who they will nominate as prime minister.

The 10-year yield climbed as much as 12 basis points to 2.23%, the highest level since July. The rate has risen 35 basis points this week, set for the biggest increase since June 2015. 

The spread over German bunds touched a four-month high of 163 basis points.

However, Ryan McGrath at Cantor Fitzgerald Ireland said investors had so far decided that the effects should not spill over into other European sovereign bond markets. 

The Irish 10-year bond traded only slightly higher, at just over 1.01%.

“The coalition implies structurally higher risk premiums given the policy uncertainty. This should ensure ongoing volatility,” said Commerzbank analysts.

Italy’s Ftse MIB index of shares fell 1.3%, with the country’s main banks leading declines. 

Before this week, the benchmark had mostly weathered post-vote political concerns as investors focused on corporate earnings and economic data. 

The gauge is still up 7.5% this year, the best performance among major western markets.

Irish Examiner and Bloomberg staff


Related Articles

‘No end in sight for Italian fiscal standoff’ with EU

Lion statue standing guard at Venice’s San Marco vandalised

Genoa fans remain silent for 43 minutes in memory of bridge collapse victims

Italy lets migrants leave ship 10 days after rescue

More in this Section

Sir Richard Branson steps down as chairman of Virgin Hyperloop One

Firm fined for unsolicited spam e-mails and marketing calls

Four members of prominent Dublin family being sued in relation to alleged debts of over €5.6m

Judgement reserved on whether An Bord Pleanála breached obligations over Apple data centre plan


Breaking Stories

Whole world in their hands: Icons design globes in aid of GOAL

Nerina Pallot dancing to her own tune

Little-known plan could save you inheritance tax

Murder they wrote: Authors prepare for Ireland's first crime writing festival

More From The Irish Examiner