Italian Economy Minister Giovanni Tria warned yesterday that German-Italian yield spread at 320 basis points is not sustainable. He noted that’s “not so much for the consequences it would have on debt interest payments”, but “for the impact it would have on the weakest parts of the banking system”.
Nonetheless, on the budget rejected by European Commission, Tria insisted that the budget is correct and there is no reason to change it.
Cabinet Undersecretary Giancarlo Giorgetti also noted earlier in the week that some smaller Italian banks will needed recapitalization if the spread breaks 400 basis points. And the coalition government stands ready to intervene if that happens.
Italian 10 year yield jumps again this week after EU rejected Italy’s budget and it’s now at 3.617.
On the other hand, German 10 year yield is trending down on risk aversion and broke 0.40 to 0.398. Spread is currently at 321.9
