By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
IndebtaIndebta
  • Home
  • News
  • Banking
  • Credit Cards
  • Loans
  • Mortgage
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Crypto
    • Forex
  • Videos
  • More
    • Finance
    • Dept Management
    • Small Business
Notification Show More
Aa
IndebtaIndebta
Aa
  • Banking
  • Credit Cards
  • Loans
  • Dept Management
  • Mortgage
  • Markets
  • Investing
  • Small Business
  • Videos
  • Home
  • News
  • Banking
  • Credit Cards
  • Loans
  • Mortgage
  • Investing
  • Markets
    • Stocks
    • Commodities
    • Crypto
    • Forex
  • Videos
  • More
    • Finance
    • Dept Management
    • Small Business
Follow US
Indebta > News > Italian bonds rally after Moody’s credit rating reprieve
News

Italian bonds rally after Moody’s credit rating reprieve

News Room
Last updated: 2023/11/20 at 7:28 AM
By News Room
Share
5 Min Read
SHARE

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Italian bonds rallied on Monday after Rome avoided a potential downgrade of its credit rating to “junk” status, in a boost to Prime Minister Giorgia Meloni’s right-wing coalition government.

Moody’s affirmed the country’s investment-grade rating in a scheduled update after markets closed on Friday, and raised its outlook for the country’s debt from negative to stable.

The resulting rally in Italian bonds pushed 10-year yields down 0.04 percentage points to 4.32 per cent, the lowest since early September. The closely watched spread between Italian and German 10-year bond yields — a gauge of the perceived risk in Italy’s debt — narrowed to just over 1.7 percentage points on Monday morning, the lowest level since late September. 

The spread — which is considered an indicator of stress in European financial markets — had surged back above 2 percentage points in October over concerns about Italy’s rising budget deficit plans and its weakening economic growth.

Moody’s cited the “stabilisation of prospects for the country’s economic strength, the health of its banking sector and the government’s debt dynamics” as it chose not to become the first of the main rating agencies to strip Rome of investment-grade status.

The agency also expressed optimism that Italy’s medium-term growth would be supported by the implementation of its €200bn, EU-funded post-pandemic reform and investment programme, despite Rome’s proposal of considerable revisions to the scheme.

Moody’s rates Italian sovereign debt at Baa3, one notch above junk, and lowered its outlook to negative in August 2022 after the unexpected collapse of a national unity government led by Mario Draghi, the former European Central Bank president, sent the country hurtling into early elections. 

However, since taking power just over a year ago, Meloni has sought to reassure international investors that her rightwing coalition would be responsible stewards of Italy’s economy and pursue fiscally prudent policies as she distanced herself from her past populist, anti-EU rhetoric.

Moody’s restoration of Italy’s stable outlook is a welcome boost for Rome at a time when it is wrestling with weakening European growth and much higher funding costs following a cycle of interest rate rises to combat inflation.

“It is incredibly good news for Meloni’s government as it creates a lot of breathing room for her politically and economically,” said Mujtaba Rahman, managing director in Europe for the Eurasia Group, a consultancy, 

Giancarlo Giorgetti, Italy’s finance minister, said the decision was “confirmation that, despite many difficulties, we are working well for the future of Italy”.

Analysts at Citigroup predicted in a note to clients on Monday that the spread between Italian and German bond yields would “tighten on the relief” of Moody’s decision “and then stabilise into December” as the Italian government reduced its bond issuance.

Italy’s lower cost of borrowing would also benefit Italian banks, the Citi analysts said, by reducing their funding costs. 

Italy’s government debt has risen above 140 per cent of its gross domestic product — the second-highest level in the EU after Greece — driven by higher spending to tackle the fallout from the coronavirus pandemic and the energy crisis caused by Russia’s invasion of Ukraine. 

Meanwhile, the country’s economic rebound from those shocks has lost momentum this year, with third-quarter GDP flatlining from the previous quarter and from a year ago.

However, the outlook for Italy has brightened recently thanks to a sharp drop in inflation, which fell to the lowest level for more than two years in October, combined with rising investor hopes that the ECB could start cutting interest rates as early as next spring. 

The central bank has also supported Italian bond markets by maintaining reinvestments in a €1.7tn portfolio of mostly government debt it started buying in response to the pandemic, despite calls from some policymakers to end this before the end of next year.

Read the full article here

News Room November 20, 2023 November 20, 2023
Share this Article
Facebook Twitter Copy Link Print
Leave a comment Leave a comment

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Finance Weekly Newsletter

Join now for the latest news, tips, and analysis about personal finance, credit cards, dept management, and many more from our experts.
Join Now
Emmanuel Macron touts France as ‘reliable’ partner for south-east Asia

Unlock the Editor’s Digest for freeRoula Khalaf, Editor of the FT, selects…

President Trump delivers remarks at ‘Investing in America’ event

Watch full video on YouTube

Cargo thieves are attacking the U.S. supply chain at alarming rates

Watch full video on YouTube

EU urges Trump to return to 90-day trade negotiation period

Unlock the White House Watch newsletter for freeYour guide to what Trump’s…

King Charles to walk diplomatic high wire with Ottawa speech

Hello and welcome to the working week.Us Brits (like our American cousins)…

- Advertisement -
Ad imageAd image

You Might Also Like

News

Emmanuel Macron touts France as ‘reliable’ partner for south-east Asia

By News Room
News

EU urges Trump to return to 90-day trade negotiation period

By News Room
News

King Charles to walk diplomatic high wire with Ottawa speech

By News Room
News

‘Mission Impossible’ and ‘Lilo & Stitch’ lift hopes for summer box office

By News Room
News

Federal Reserve’s Jay Powell urges US university students to protect democracy

By News Room
News

Don’t underestimate the Chinese consumer

By News Room
News

Oil chiefs warn of end to US shale boom

By News Room
News

Massive Russian air attack on Ukraine dashes hopes for ceasefire

By News Room
Facebook Twitter Pinterest Youtube Instagram
Company
  • Privacy Policy
  • Terms & Conditions
  • Press Release
  • Contact
  • Advertisement
More Info
  • Newsletter
  • Market Data
  • Credit Cards
  • Videos

Sign Up For Free

Subscribe to our newsletter and don't miss out on our programs, webinars and trainings.

I have read and agree to the terms & conditions
Join Community

2023 © Indepta.com. All Rights Reserved.

Welcome Back!

Sign in to your account

Lost your password?