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Italy getting easier ride on international bond market

Italy getting easier ride on international bond market
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The cost of borrowing for the Italian government continues to fall, and the economy has been given a further boost by a ratings agency upgrade. Moody’s forecast of better prospects for Italy’s debt has produced a further narrowing of the spread between its bonds and Germany’s, the European benchmark.

10-year bond yields fell on Monday after the Italian treasury placed 2.5 billion euros of three and one-year T-bills, themselves at lower rates.

From the dark days of Silvio Berlusuconi’s sex scandals, when Italy had to pay 7.3% interest on any money it borrowed to today’s 3.6%, it has been a bumpy ride as yields have fluctuated.

It is excellent news for the new designate Prime Minister Matteo Renzi.

“The Italian benchmark spread has shrunk to an eight-year low, thanks to the expectations of the new government. The markets are probably confident that Renzi can put in place the economic reforms that Italy needs,” says market analyst Edoardo Liuni.

Recession may be over but growth is still tiny, total debt is at two trillion euros, and unemployment is at crippling levels.

Renzi has said fighting unemployment will be his top priority, and has published his action plan, month by month.

Labour laws will be reformed in March, with the turn of public administration in April, and fiscal reforms in May. It is known Italy’s bosses will push for lower payroll taxes, something they say is urgent, and with such a packed calendar it seems that the Economy Minister, yet to be announced, will be crucial in this new government if progress is to made.