Monday 20 April 2020 9:20 am

Italy's borrowing costs rise as investors await key coronavirus meeting

Italy’s borrowing costs have risen again today as investors nervously await an EU meeting on Thursday where countries will try to thrash out an agreement on how to tackle the coronavirus fallout.

Italian bond yields, which move inversely to prices, have risen in recent weeks as the EU has struggled to find a decisive and united approach to dealing with the economic damage coronavirus has wreaked on the Eurozone.

Read more: FTSE 100 rises as governments debate reopening damaged economies

The sticking point has been an argument over so-called coronabonds, jointly issued debt across the Eurozone that could ease the stress on hard-hit but highly indebted countries like Italy.

Countries such as France, Italy, Portugal and Spain have all pushed for jointly issued debt. But northern European countries such as Germany and the Netherlands are deeply opposed to the idea, saying their voters will not tolerate financing other countries.

The yield on Italy’s 10-year bond has climbed 10 basis points (0.10 percentage points) this morning to 1.881 per cent. This is close to the one-month highs seen last week. 

The rise in yields occurs as prices fall, signalling that investors think holding Italian government debt is becoming a riskier prospect.

The difference between Italy and Germany’s 10-year yield – a key measure of stress in the Eurozone – rose to 235 basis points.

Deutsche Bank’s Jim Reid said: “Thursday is the key day this week with the EU leaders summit a potentially big event for the future of Europe as they discuss how close the region can get to joint issuance in the near future.”

He said a clear and united decision is unlikely. “Expect creative ambiguity to rule as it normally does on the continent,” he said.

Read more: Coronavirus: Eurozone economy suffers record hit in March

“Nevertheless you would expect more explicit details to be outlined as to how Europe will help Italy.”

Investors also sold off Spanish and Portuguese government debt this morning. The Spanish 10-year yield rose 3.5 basis points to 0.837 per cent. Portugal’s 10-year yield climbed 2.7 basis points to 0.984.