August 5, 2021

Italy's risk premium exceeds 300 points while the euro continues to fall due to uncertainty

Italy's risk premium exceeds 300 points while the euro continues to fall due to uncertainty


Specifically, the change of the euro, which on Monday closed at a price of 1.1578 dollars, has reacted down to 1.1518 dollars, its worst crossing with the currency of the United States since last August 20.

Also, the interest for the Italian 10-year bond has rebounded 2.58%, reaching maximum since March 2014. While Monday interest closed at a price of 3.292%, this Tuesday has climbed to 3.376%, which represents the highest price for four years.

Last week, the cost of Italian debt has already risen. Thus, the interest of the Italian bond stood on Friday at 3.221%, after closing on Thursday at 2.916%.

The increase in interest on Italian debt has caused the risk premium, the differential between the Italian and the 10-year German bond, to increase to 293.9 basis points. The differential against the German bond started the day at 282.7 basis points and reached maximums of 303.4 points, which is the highest figure since May 29 this year, when it rebounded during the day to 317.9 points.

In addition, it is the second worst reading since 2013, when the Italian risk premium was set above the 300 basis points.

"The situation in Italy does not seem to be a good omen for the country and the new government plans do not make it better", explained Bart Hordijk, analyst at Monex Europe. "An increasing fiscal debt is completely good for a country if its economy grows faster (…), but the assumption that Italy will achieve growth of more than 2.5% in the coming years appears as an illusion", he said. added

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