Italian 10-Year BTP government bond yields soared in 2022 to a yield above 4.6%, adding 350bps since the start of the year and remaining close to near decade high of 4.8% touched on November 12th. Global central banks raising rates, including the ECB to soak up excess liquidity and fight inflation bonds around the world fell hard and yields rose. Additionally increased fiscal risk in the Italian economy pressured yields higher. Italy saw more political turmoil in 2022 which resulted in snap elections that saw the Brothers of Italy’s Giorgia Meloni take the Prime Minister’s office.
With the new government next year’s budget expanded to allocate more than EUR 21 billion for energy aid. The plan widens the country’s budget deficit to 4.5% from earlier plans of 3.4%.
Germany also saw its yields rise to the highest since 2011 as the ECB hiked its key rates by 250bps since the start of its tightening cycle in July and announced the start of quantitative tightening, pressuring Italian bonds due to its debt-ridden economy. The spread between the 10-year BTP and its German counterpart widened to 210bps from 135bps in January, pointing to a sharp increase in perceived credit risk in Italian debt.
Source: TC, Reuters
From The TradersCommunity News Desk