Rome: Prime Minister Mario Monti's market honeymoon is ending as Italian bond yields near 7 per cent signal mounting concern his government may struggle to sell €440 billion (Dh2.11 trillion) of debt next year.
Monti took just five weeks in office to push through a €30 billion emergency budget package aimed at taming surging borrowing costs. Investors reacted to the plan's final approval by the Senate on Thursday by driving up the yield on Italy's 10-year benchmark bond by 12 basis points to 6.91 per cent, near the 7 per cent level that prompted Greece, Ireland and Portugal to seek bailouts. It was at 6.94 per cent at 10:13am in Rome.
"The Monti effect has now also been priced in and I think there is a lot of room for disappointment next year," said Lex Van Dam, who manages $500 million in assets at Hampstead Capital LLC in London.
Italy's 10-year bond yield reached a euro-era record 7.48 per cent on November 9, one week before Monti took over from former Premier Silvio Berlusconi and three months after the European Central Bank started backstopping the nation's bonds.
