Italy

Italy's bond yields tumbled on Tuesday amid growing investor expectations that its political crisis could be short-lived, potentially paving the way for a new coalition government and reducing the uncertainty of snap elections, the International New York Times reported on a Reuters story. Prime Minister Giuseppe Conte announced his resignation as he made a blistering attack on his interior minister, Matteo Salvini, accusing him of sinking the ruling coalition for personal and political gain.

The bond market used to like the idea of Matteo Salvini as Italy’s leader. Now it’s becoming worried. As League party leader Salvini attempts to force fresh elections, investors fear victory would embolden a new government to ramp up spending and clash with the European Union again over budget deficit limits, Bloomberg News reported. With the nation’s bonds having seen the biggest one-week selloff since the current coalition was formed in May last year, more turmoil is expected and could lead its borrowing costs to return to levels that could rattle global markets.

A fresh bout of political instability in Italy is testing investors’ faith in a bond rally that has sent Rome’s borrowing costs tumbling this year, but bondholders are reluctant to head for the exit. Italian debt came under pressure on Friday after the far-right League tabled a vote of no confidence in Prime Minister Giuseppe Conte, as party leader Matteo Salvini pulled the plug on Italy’s governing coalition, the Financial Times reported. The 10-year Italian bond yield rose by 0.23 percentage points to 1.76 per cent, extending the previous day’s rise.

Italian regional bank Popolare di Sondrio (BPSI.MI) said on Thursday it would sell 1 billion euros’ ($1.1 billion) worth of bad loans to lower their share of total lending to around 8% by 2022, Reuters reported. The bank said it had booked 106 million euros in loan writedowns between January and June, raising its provisions on defaulted loans to 68.4% of their value, meaning the latest sale was not expected to have any further negative impact. Popolare di Sondrio held impaired loans equivalent to 13.65% of total lending at the end of June.

The cloistered quads and frescoes of the palazzo of San Salvador near the Rialto bridge in Venice have long been the property of the Italian state — but they will soon have a new owner, the Financial Times reported. In an attempt to chip away at €2.3tn in public debt the former monastery, founded in the 12th century on the orders of Pope Alexander III, is up for sale. Rome is cashing in on its valuable portfolio of state-owned assets by holding a fire sale of historic properties, from disused army barracks to forts, monasteries and lighthouses.

Italy's biggest retail bank Intesa Sanpaolo has clinched a deal with U.S. hedge fund Davidson Kempner over 10 billion euros (£9.16 billion) in problem loans, moving closer to a 2021 target of cutting soured debts to 6% of total lending, the International New York Times reported on a Reuters story. In reporting a higher-than-expected net profit for the second quarter, Intesa on Wednesday said it would sell 3 billion euros in so-called 'unlikely-to-pay' (UTP) loans to Prelios, a loan recovery specialist owned by the New York-based fund.

When ArcelorMittal temporarily laid off about 1,400 Italian workers at its Taranto plant last month, it was just the latest sign that the eurozone’s economic weakness was feeding into the labour market in the bloc’s third-largest economy, the Financial Times reported. The lay-offs — which will last for 13 weeks and are part of a broader cutback in the steelmaker’s European production volumes — came as a result of “really critical” market conditions, ArcelorMittal Italia chief executive Matthieu Jehl said at the time.

Bank of Italy Governor Ignazio Visco has renewed his call for a review of European rules on banking crises that limit the ability to help ailing lenders, Bloomberg News reported. “A legislation initiative of the new European Commission to review the BRRD directive would represent the occasion to tweak current rules, in order to make the regulation framework more flexible and appropriate for the nature of the banking industry,” Visco, who also sits on the European Central Bank’s Governing Council, said in a Friday speech to Italy’s bankers in Milan.

A state-backed plan to revive Italy’s sickly construction industry through a series of mergers could take a step forward next week when its biggest builder, Salini Impregilo, expects to approve a takeover bid for its nearest rival, Reuters reported. Known as “Project Italy”, the joint public-private initiative has evolving for months in response to an industry crisis that has sent about 120,000 firms broke over the past decade and saddled others with crippling debts.

For investors in Italian debt, the round-trip is complete. Government bonds have climbed back to levels previously seen before the election that brought a populist coalition to power last year. Borrowing costs had spiked in May 2018 after the government’s spending plans set it on a collision course with EU leaders. Italy’s 10-year yield rose as high as 3.5 per cent, in a worrying echo of the depths of the sovereign debt crisis. That now feels like a distant memory, the Financial Times reported.