Rome

Spread reaches threshold set by Mario Monti

Gap between Italian, German bonds widens over election fears

Spread reaches threshold set by Mario Monti

Rome, February 25 - Uncertainty around the outcome of the Italian general election widened the spread between Italian 10-year bonds and their German counterparts Monday to a threshold set by outgoing premier Mario Monti. After some significant fluctuations as election results came in, the spread closed trading Monday at 287 basis points. That's exactly half of what it was when ex-premier Silvio Berlusconi was forced from office in November 2011 after bringing Italy to the brink of financial disaster. Monti, brought in as a caretaker premier, had said his goal was to cut the spread in half - to 287 points. It reached that level at the beginning of 2013, and continued to fall to as low as 260 basis points earlier Monday when it initially appeared the center left might win a sound majority in the Italian election. However, as election results continued to come in late Monday, investors' concerns began to rise at the prospects of Berlusconi pulling ahead in the national vote. The spread between Italian 10-year bonds and the German benchmark is a key gauge of market confidence in Italy's ability to pay down its huge debt.

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