Italy bond spread rises over market turbulence in case of No referendum win

The spread between Italian and German 10-year bonds, a mark of investor confidence in the Italian economy and of Italy's borrowing costs, rose to a two-year high of 186.1 basis points on Wednesday with a yield of over 2.1 percent.

This was the highest the spread has been since October 2014. The spread has spiked recently amid concern over the political instability that could occur if a majority of Italians vote No in a Dec. 4 referendum on Prime Minister Matteo Renzi's constitutional reform law.

Renzi has said he is prepared to step down in case his reform is defeated since he is not interested in "treading water" at the head of an interim executive leading to a general election.

Also on Wednesday, a top economist at Standard & Poor's said the ratings agency expects market turbulence -- but not a full-blown crisis -- in case of a No referendum victory.

"We'll certainly have a little turbulence on the markets," Jean-Michel Six, the Europe, the Middle East and Africa (EMEA) chief economist for Standard & Poor's Global Ratings, told a conference in Milan.

"Markets are concerned over (Italians) banks and the non-performing loans situation, because a No win would probably delay the solution of these problems," said Six.

However, the economist said a repeat of the 2010 sovereign bond crisis is unlikely thanks to European Central Bank (ECB) President Mario Draghi's outright monetary transactions (OMT) bond purchasing program. Endit