(Bloomberg) -- Global bond funds were net sellers of over 60 billion euros ($68 billion) of Italian bonds in 2018 as the nation's markets were rocked by the populist government's budget battle with the European Union.
That was the most since 2016, and contrasted with foreign investors snapping up a net 13 billion euros of the securities in 2017, data released Tuesday by the European Central Bank showed. The figures highlight how sentiment toward the euro area's third largest economy deteriorated, with Italy still facing a string of potential hurdles, including a Fitch Ratings review Friday that could see the nation downgraded to one level above junk.
Read more: Recession, Rating, Politics: A Winding Road for Italy's Bonds
“Foreign investors tend to be more sensitive to topics such as populism than domestic ones,” said Jan von Gerich, chief strategist at Nordea Bank AB. “It has been quite common in Italy that when there are increasing political risks, the foreign owners start unloading their exposure, while the domestic financial institutions take a more supportive role.”
Italian 10-year bond yields rose six basis points to 2.83 percent Tuesday, with the spread over those on German bonds widening by eight basis points to 274.
To contact the reporters on this story: John Ainger in London at jainger@bloomberg.net;James Hirai in London at jhirai3@bloomberg.net
To contact the editors responsible for this story: Ven Ram at vram1@bloomberg.net, Anil Varma
©2019 Bloomberg L.P.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
