{"id":18558,"date":"2018-10-18T23:10:12","date_gmt":"2018-10-18T20:10:12","guid":{"rendered":"https:\/\/bestinsurance.gr\/a1\/?p=18558"},"modified":"2018-10-18T23:10:12","modified_gmt":"2018-10-18T20:10:12","slug":"italian-bonds-plunge-euro-slides-as-eu-takes-aim-at-budget-plan","status":"publish","type":"post","link":"https:\/\/bestinsurance.gr\/a1\/archives\/18558","title":{"rendered":"Italian Bonds Plunge, Euro Slides as EU Takes Aim at Budget Plan"},"content":{"rendered":"
(Bloomberg) —<\/span><\/section>\n
Italy\u2019s bonds<\/a> plunged Thursday just hours after the Treasury successfully conducted a bond-exchange operation as the European Union\u2019s executive body dispatched a letter to the nation\u2019s government and investors sharpened their focus on budget concerns. The euro also fell.<\/p>\n

The yield on Italy\u2019s 10-year surged as much as 15 basis points to around 3.70 percent on an intraday basis, widening the spread over equivalent German debt to levels unseen since 2013, while Europe\u2019s common currency<\/a> slid as much as 0.4 percent to $1.1455. Italy\u2019s Draft Budgetary Plan for 2019 constitutes \u201can obvious significant deviation\u201d from European Union rules, Commissioners Valdis Dombrovskis and Pierre Moscovici wrote in a letter<\/a>to the country\u2019s finance minister that was released publicly after the local bond market closed.<\/p>\n

The missive from the EU marks the start of a process, which could culminate in a decision by the European Commission to issue a negative opinion next week — essentially rejecting Italy\u2019s budget — and asking the Italian government to send it back with revisions. That has never happened before.<\/p>\n

\u201cThe Italian government is going to get further into this standoff with the EU,\u201d said Ben Emons<\/a>, chief economist at Intellectus Partners LLC. \u201cThe market is continuing to realize that there is not going to be an easy resolve and there will be a lot of brinkmanship as we are seeing.\u201d<\/p>\n

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Italian Finance Minister Giovanni Tria said<\/a> the EU and Italy have different views about the country\u2019s policies and he hoped \u201cwith dialogue\u201d these views would \u201ccome closer together.\u201d Moscovici said the letter is not final and there is still time which should be \u201cused productively\u201d to continue to exchange views.<\/p>\n

European Central Bank president Mario Draghi for his part told EU leaders<\/a> at a summit in Brussels Thursday that questioning the bloc\u2019s rules can worsen financial conditions and damage growth, according to an official familiar with his remarks, which are likely aimed at Italy\u2019s budget dispute with the Commission.<\/p>\n

For story on EU\u2019s comments on Italian budget, click here.<\/a><\/p>\n

The country also faces credit-rating decisions from S&P Global Ratings and Moody\u2019s Investors Service before the end of the month, with both companies ranking Italy just two notches above junk.<\/p>\n

The market moves came in the wake of an bond exchange operation by the Italian Treasury, which saw the government switch 3.8 billion euros ($4.38 billion) of inflation-linked securities, known as BTP Italia, for five nominal bonds with maturities ranging from 2025 to 2046. That was more than the 3 billion-euro outlined by the Treasury beforehand, but bond investors soon took umbrage, pushing the yield spread over Germany to the highest level in more than five years.<\/p>\n

\u2018Despondent Mood\u2019<\/h3>\n

\u201cThe Treasury released much more duration in the market, which is going to weigh on BTPs as whole,\u201d said Antoine Bouvet<\/a>, a strategist at Mizuho International Plc. \u201cThis confirms the despondent mood in BTP markets.\u201d<\/p>\n

Italy\u2019s bonds have been roiled in recent months by the prospect that its new government\u2019s spending plans would fall foul of EU rules and add to its already hefty stock of debt — around 130 percent of gross domestic product. The Treasury likely wanted to take advantage of a slim window of opportunity before headlines continue to bruise Italy\u2019s ailing debt market, according to Societe Generale SA.<\/p>\n

\u201cThey need to raise cash so finding a quiet time to do that is important,\u201d said Ciaran O\u2019Hagan<\/a>, head of European rates strategy. The Italian Treasury \u201cneeds to refinance maturing debt by issuing new bonds and that process is almost continuous given that Italy is Europe\u2019s largest issuer.\u201d<\/p>\n

Italy bought back the BTP Italia<\/a> maturing in April 2020 and sold bonds maturing<\/a> in 2025, 2028, 2029 and 2046 through a syndication of banks. Italy\u2019s 10-year yields climbed 11 basis points to 3.66 percent, with the spread over Germany hitting 326 basis points, the highest level since April 2013. The bonds of Spain and Portugal also dropped, with the former having to digest its own wave of supply, while yield on U.S. Treasuries fell amid a bid for safer assets.<\/p>\n<\/section>\n","protected":false},"excerpt":{"rendered":"

(Bloomberg) — Italy\u2019s bonds plunged Thursday just hours after the Treasury successfully conducted a bond-exchange operation as the European Union\u2019s executive body dispatched a letter to the nation\u2019s government and investors sharpened their focus on budget concerns. The euro also fell. The yield on Italy\u2019s 10-year surged as much as 15 basis points to around<\/p>\n","protected":false},"author":1,"featured_media":18559,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","jetpack_publicize_message":"","jetpack_publicize_feature_enabled":true,"jetpack_social_post_already_shared":true,"jetpack_social_options":{"image_generator_settings":{"template":"highway","default_image_id":0,"font":"","enabled":false},"version":2}},"categories":[1],"tags":[],"class_list":["post-18558","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-1"],"jetpack_publicize_connections":[],"_links":{"self":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/18558","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/comments?post=18558"}],"version-history":[{"count":1,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/18558\/revisions"}],"predecessor-version":[{"id":18560,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/posts\/18558\/revisions\/18560"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media\/18559"}],"wp:attachment":[{"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/media?parent=18558"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/categories?post=18558"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/bestinsurance.gr\/a1\/wp-json\/wp\/v2\/tags?post=18558"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}