Italian Stocks Are at Risk of Bond Spread Widening: Chart

Political turmoil in Italy is pressuring benchmark BTP bonds and increasing the yield spread with German Bunds, and weighing on the country’s stock market. The FTSE MIB Index’s relative performance trailed the tightening in bond spreads back in 2020 and 2021, but recently this gap has narrowed, providing less of a cushion. Italian bond spreads tend to impact equities, particularly financial companies, which own a large chunk of the nation’s bonds and have a 29% weight in the benchmark, making them sensitive to political turmoil.

Source: Bloomberg