Salvini says Ital­ian spread won’t touch 400 in dare to in­vestors

Gulf Times Business - - BUSINESS -

Ital­ian Deputy Premier Mat­teo Salvini said he is “ab­so­lutely sure” the spread be­tween Ital­ian and Ger­man bond yields won’t reach 400 ba­sis points, sig­nalling his de­ter­mi­na­tion to ride out the mar­ket storm trig­gered by his govern­ment’s bud­get plans.

Salvini, leader of the anti-mi­grant League, and Luigi Di Maio of the anti-es­tab­lish­ment Five Star Move­ment both in­sisted Wed­nes­day that they’ll stick to their costly elec­tion prom­ises as the 10-year spread, a key gauge of fi­nan­cial strain, touched 308 ba­sis points. The last time the gap reached 400 was in 2012 at the height of the Euro­pean debt cri­sis.

“Should I change my poli­cies – my agree­ment with Ital­ians – on the ba­sis of what some spec­u­la­tors de­cide in the morn­ing? No,” Salvini said in a tele­vi­sion in­ter­view with state broad­caster RAI. Asked whether he is confident the 10-year yield spread won’t pass 400 ba­sis points, Salvini replied: “Ab­so­lutely sure.”

“Fi­nanciers spec­u­late and profit on the backs of the peo­ple,” Salvini said, adding that govern­ment pol­icy won’t be “dic­tated” by for­eign in­vestors or Euro­pean Union com­mis­sion­ers.

Ital­ian bonds dropped from the open Wed­nes­day with in­vestors dis­ap­pointed there’s still no sign that the govern­ment in Rome will back down.

Ten-year yields rose 5 ba­sis points to 3.53%, though still short of the four-and-a-half year high of 3.71% touched on Tues­day.

One ad­di­tional risk for Italy is that bond rat­ing agen­cies down­grade the govern­ment’s debt, trig­ger­ing fur­ther sell­ing. Moody’s In­vestors Ser­vice is due to re­view Italy, which has a neg­a­tive out­look, be­fore the end of the month while S&P Global Rat­ings’s re­view is due Oc­to­ber 26. Both rate Italy two notches above junk.

Mark Zandi, chief econ­o­mist at Moody’s An­a­lyt­ics Inc, a sis­ter com­pany of the rat­ings agency, branded Italy’s fis­cal plan “a mis­take” in an in­ter­view with news­pa­per La Stampa.

“It’s log­i­cal to ex­pect that the con­cerns on Italy ex­pressed by the mar­kets in re­cent days will also be re­flected in the next as­sess­ments by rat­ings agen­cies,” Zandi said. The plan is “gam­bling with Italy’s long-term eco­nomic and fis­cal health,” he added.

Salvini brushed off the mar­ket con­cern, as he has done re­peat­edly in the past.

“I re­mem­ber they did this in the past,” Salvini said. “In­ves­ti­ga­tions by some coura­geous prose­cu­tors cer­ti­fied that rat­ings cuts were com­pletely ground­less and some peo­ple prof­ited from them.”

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