Investors are questioning how far Italy’s borrowing costs can rise before they rip a hole through the heavily-indebted country’s economy, as a sell-off intensifies across eurozone bond markets.
Yields have shot higher in the bloc since the European Central Bank last week signalled an end to the stimulus measures it ramped up at the onset of the coronavirus pandemic. ECB president Christine Lagarde confirmed plans to withdraw a large-scale bond-buying programme and to initiate interest rate rises next month to tackle record levels of inflation.
In turn, Italy has found itself in the market’s crosshairs, because of its need to refinance a borrowing load of around 150 per cent of gross domestic product. Investors are dusting off calculations from the eurozone debt crisis a decade ago as they try to understand when the rise in yields could start to imperil finances for the Italian government as well as for companies and households.