Italy

Italian banks have increased their holdings of government debt by the largest amount since the early days of the country’s bond market sell-off nearly six months ago, in the latest sign that the eurozone ‘doom loop’ is still going strong, the Financial Times reported. Financial institutions in Italy bought a net €6.9bn of Italian government bonds in October, according to newly-released data from the European Central Bank. That takes their total net increase in sovereign bond-holdings since the market first tanked in May to €54bn.

German economist Clemens Fuest described Italy as the “bigger problem, particularly in the medium term” as he claimed the impact of Brexit would be only a “short-term issue,” Daily Express reported. Italy has sent the eurozone into meltdown and the euro currency floundering after announcing its spending plans which include a deficit target of 2.4 percent for 2019. The budgetary measures enraged European Commission (EC) chiefs, who sensationally rejected the fiscal plans after claiming they breached previous spending agreements.

Italy’s Prime Minister Giuseppe Conte said on Friday that the government’s priority is to protect jobs at Italian aircraft maker Piaggio Aerospace, and will discuss the matter in the coming hours. Piaggio Aerospace has asked the government to be put under special administration after a 2017 turnaround plan failed to produce the expected results, Reuters reported. The company, a unit of Abu Dhabi’s sovereign fund Mubadala, produces unmanned drones used by the Italian airforce.

Italian households have refused to help finance their government’s deficit-boosting budget, with a landmark retail bond sale proving to be a flop, the Financial Times reported. This week’s BTP Italia sale — which closes today after running for four days — has raised €2.2bn from retail and institutional investors, well below the usual €7 to 8bn scale that such bonds reach. The European Commission’s decision on Wednesday to move towards enforcement action against Italy over its budget proposals failed to entice a late wave of investors into the deal.

Italian aircraft maker Piaggio Aerospace has asked the government to be put under special administration after a 2017 turnaround plan failed to produce the expected results, the company said on Thursday, Reuters reported. “The prolonged uncertainty and present market conditions make the company no longer financially sustainable,” it said in a statement. Piaggio Aerospace, a unit of Abu Dhabi’s sovereign fund Mubadala, produces unmanned drones used by the Italian airforce.

Sentiment in Italy’s financial sector soured on Tuesday as the tug of war between the government and the EU over the country’s 2019 budget carried on and amid broader aversion to risk among investors, the Financial Times reported. The yield on the 10-year bond hit a session high of 3.711 per cent, an increase of 13 basis points, after the Italian deputy prime minister Luigi Di Maio told a domestic radio show that although the two parties should work towards a solution, the key measures in the country’s budget should not be touched.

Foreign investors in Italy’s bond market shed a net €1.5bn of government debt in September, in the latest evidence that the market jitters of the past six months have eroded their willingness to hold Italian paper, the Financial Times reported.

London will no longer be the first stop for European governments selling bonds, as the bulk of business on a key platform switches to Milan ahead of the deadline for the UK’s departure from the EU next year, the Financial Times reported. From the start of March only the UK government and UK-based banks will use a London-based arm of MTS Cash, a venue owned by the London Stock Exchange Group. It plays a key role in linking sovereign borrowers with the investment banks that help price the bonds and sell them to asset managers.

What threat do Italy’s bond market woes pose to the yields on other eurozone nations’ debt? Yields on Italian bonds have been ratcheting up since a populist Eurosceptic coalition took power in May. The government’s recent agreement of an aggressive budget plan for 2019 has provided a further upward momentum, leading to a fresh sell-off of Italian debt and a fall in the country’s bank stocks, the Financial Times reported. So far there has been little sign of contagion.

Italy's government is looking to avoid European sanctions over its 2019 budget, Deputy Prime Minister Luigi Di Maio said on Thursday while stressing he did not want Italians to have to foot the bill, the International New York Times reported on a Reuters story. "When they ask us to respect all the rules, they are asking us for a blood and tears budget," Di Maio said. On Wednesday, Italy re-submitted its draft 2019 budget to the EU Commission with the same growth and deficit assumptions as a draft previously rejected for breaching EU rules, stepping up its showdown with Brussels.