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Increase in Italian-German bond yield spread feeds worries over Italy's public debt

Xinhua, February 9, 2017 Adjust font size:

The spread between the yields of Italian 10-year bond and German equivalent Bund still exceeded 200 basis points on Wednesday, feeding concerns related to the country's high debt.

The spread continued over the 200-basis points mark after reaching its highest level since Feb. 2014. The spread rose to 201 points in early trading on Wednesday with a yield of 2.34 percent.

It has risen amid fears of a "Frexit" threatened by French righting populist leader Marine Le Pen and the possibility of instability if Italy has early elections this year, according to Ansa news agency.

On Tuesday, Italian Economy Minister Pier Carlo Padoan said the recent rise in the spread was a "rude" reminder that Italy could not afford to stop taking action to reduce its debt of over two trillion euros.

The two countries' government bonds reached 203 points during the day on Tuesday, before dropping back to around 196 points.

On Monday, the Italian-German yield spread had already exceeded the 200-point threshold, before closing at 199 points.

It was the widest gap registered since Feb. 2014, Ansa news agency reported.

Italy's debt was 133 percent of the gross domestic product (GDP) in 2016, and was expected to remain at 133.1 percent in both 2017 and 2018, according to macro-economic forecasts released by the European Union (EU) Commission in November.

The tensions of French presidential campaign -- and far-right candidate Marine Le Pen's remarks over a possible exit of France from the EU -- boosted uncertainties among investors in the European government bond market, according to Italy's leading business daily Il Sole 24 Ore.

"Italy was not the trigger (of the turbulence) this time, yet it was the hardest hit... and it continues to be viewed as the weak ring in the euro chain," the newspaper said. Endit