Business World

Sunday 18 March 2018

Patriotic Italians are buying country's bonds


Patriotic Italians -- from ordinary citizens to Ferrari president Luca di Montezemolo -- are buying up the country's debt even as foreign investors dump its bonds on fears they might not get their money back.

The country is not normally prone to such chauvinism. It only unified in 1861, and has one of the highest tax evasion rates in Europe.

Of course, the hefty returns now on offer are helping.

"At 5.5pc and 6pc, it's a very good return. Many people (in Italy) are buying Italian bonds at the moment," said an Italian private banker at a global bank.

"I myself bought more BTPs (Italian Treasury Bonds) recently."

Mr Montezemolo, chairman of Italian automotive group Fiat and a member of one of Italy's oldest aristocratic families, continues buying Italian bonds, something he has always done, a spokesperson told Reuters.

Italy has always been able to rely on a substantial retail bid for its bonds. Such investors have increased their holdings of the country's sovereign debt by up to 5pc over the past two months to take advantage of yields that have rocketed to more than 7pc, the banker and a Milan-based broker said.

This will hardly offset a general sell-off trend, however, noted a second Milan-based broker. Borrowing costs at current levels are widely viewed as too high for Italy to continue servicing its debt pile, the world's third-largest and equivalent to 120pc of gross domestic product.

Foreign investors have cut their exposure to Italy to about 45pc from 51pc since the beginning of the year, several Milan-based banking sources said.

In its latest report on financial stability published in November, the Bank of Italy estimates that 42.4pc of Italy's debt is held abroad, in line with Spain, and compared with 50.1pc for Germany and 57.9pc for France . (Reuters)

Irish Independent

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