Italian Bonds Decline a Third Day as Letta Faces Confidence Vote Italy’s 10-year bonds fell for a third day after Prime Minister Enrico Letta said he would face a confidence vote following Silvio Berlusconi’s withdrawal of support for the nation’s five-month-old administration. The yield on the securities rose to the highest level in more than three months as Letta defied Berlusconi’s attempt to force new elections, saying he would request the vote for Oct. 2. Berlusconi, a partner in the ruling coalition, has pulled his ministers from the Cabinet. German bonds climbed with Treasuries as U.S. politicians clashing over the budget threatened a government shutdown. “It’s a negative development for Italy, and I certainly expect it to weigh on Italian bonds,” said Mathias Van Der Jeugt, a fixed-income strategist at KBC Bank NV in Brussels. “We may see 10-year yields move toward 5 percent. However, we don’t expect to be too dramatic as the overall situation in the euro zone is for more stable than it was in 2011.” Italy’s 10-year yield climbed 18 basis points, or 0.18 percentage point to 4.59 percent at 7:19 a.m. London time, after touching 4.66 percent, the highest level since June 27. The rate reached a euro-era record 7.48 percent in 2011. The 4.5 percent bond maturing in May 2023 fell 1.35, or 13.50 euros per 1,000-euro ($1,349) face amount, to 99.66. The rate on similar-maturity Spanish bonds rose 10 basis points to 4.47 percent. Letta needs 24 votes in the Senate to secure a new majority without Berlusconi, Corriere Della Sera reported. To do so, the 47-year-old premier must win over opposition lawmakers or get members of Berlusconi’s People of Liberty party to abandon their leader. Letta’s plan to appeal to lawmakers won an endorsement yesterday from President Giorgio Napolitano, who is responsible for calling snap elections if parliament is deadlocked. The 10-year German bund yield fell two basis points to 1.76 percent. The rate slipped 17 basis points last week, the most since July 2012. In the U.S., Congress has one day to end a stalemate that raises the risk of the first government shutdown in 17 years and threatens talks to increase the debt limit. The House of Representatives voted 231-192 yesterday to stop many of the Affordable Care Act’s central provisions for one year, tying it to an extension of U.S. government funding through Dec. 15. Should the Senate reject the bill today the government could be shut down from tomorrow. Even if the budget fight is resolved, lawmakers would immediately move to the next fiscal dispute over raising the $16.7 trillion debt ceiling. Failure to approve funding to keep the government open and to raise the debt ceiling would have a destabilizing effect on the economy, President Barack Obama said in a televised statement Sept. 27. Closing the government would cut fourth-quarter economic growth by as much as 1.4 percentage points depending on its length, according to economists from Moody’s Analytics Inc. to Economic Outlook Group LLC. Treasuries rose, pushing the 10-year yield two basis points lower to 2.60 percent. Consumer prices in the euro area rose 1.2 percent this month, after a 1.3 percent gain in August, the European Union’s statistics office in Luxembourg will say today, according to the median forecast in a Bloomberg News survey of 34 economists. Euro-area unemployment held at a record 12.1 percent in August report will show tomorrow, according to a separate survey. Italian bonds gained 3.7 percent this year through Sept. 27, according to Bloomberg World Bond Indexes. German securities lost 1.5 percent, while Spain’s gained 8.8 percent.
Posted on: Mon, 30 Sep 2013 07:05:00 +0000
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