Italian-German bond spread widens to 260 basis points

Milan, other European markets, close week on a soft note

Italian-German bond spread widens to 260 basis points

Milan, September 13 - The spread between Italian and German bond yields widened on Friday amid ongoing uncertainty about the future of Premier Enrico Letta's left-right government. Meanwhile, the Milan stock exchange, like many of its European counterparts, showed only small gains, in part due to concerns about growth prospects in the world's largest economy. Milan's FTSE-Mib index climbed by 0.14% to close trading at 17,547.91 points after reports that retail sales in the United States came in below expectations, suggesting continuing weakness that could be felt around the globe. The US data showed that retail sales in August rose by just 0.2% compared with the previous month - the weakest report in four months and below analysts' expectation of a 0.5% increase. That, coupled with recent weak employment data, is raising concerns that the nascent economic recovery in the US may be fizzling out. Investor nervousness was also demonstrated through the widening spread between Italy's 10-year bond and its German counterpart, which reached 260 basis points Friday, a measurable increase from Thursday's close of 253 basis points. The yield on Italian 10-year paper closed the week at 4.57%. The spread between lending rates in the two countries is seen as an indication of investor faith in the Italian economy and its ability to cope with a lingering recession. On other European markets, Spain's IBEX 35 gained 0.19% to 8,941.60 points while Frankfurt's DAX rose by 0.18% to close at 8,509.42 points. In Paris, the CAC 40 gained 0.19%, closing at 4,114.50 points, while in London, the FTSE index of leading British shares was almost unchanged, falling by just 0.08% to close at 6,583.30.

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