Bets against Italy's bond market at highest since 2008, data suggests

Credit: REUTERS/Tony Gentile

Aug 25 (Reuters) - Investor bets against Italy's government bond market are at their highest since 2008, data from S&P Global Market Intelligence suggests, in a sign of growing unease about Italy's economic and political outlook.

Soaring inflation, rising interest rates and renewed political uncertainty have hurt Italian government bonds. Italy's benchmark 10-year bond yield is up some 46 bps in August alone to around 3.61% IT10YT=RR.

The amount of Italian debt on loan to investors rose to as high as 39.2 billion euros ($39 billion) at the start of August, the most since January 2008, S&P Global Market Intelligence data showed.

That suggests a build up short-positions - bets that the price of an asset will weaken - in Italy's bond market, which is the biggest in terms of outstanding debt in the euro area.

One way for investors to short an issuer's debt is to borrow it, then sell the debt with the expectation that the price will fall before the investor has to buy the debt back. Bond yields move inversely with prices.

Uncertainty around what Italy's government will look like after elections in September means investors are nervous.

This comes just as an escalating energy crisis has fed fears that inflation will rise further. Borrowing costs across the euro area are up sharply in August as investors brace for the European Central Bank to hike rates more than previously expected.

Italy's bond market in particular is viewed as a proxy for risk in peripheral European markets and is watched closely by investors and policymakers.

Italy's Meloni says public finances will be safe in her hands L8N3004XP

(Reporting by Yoruk Bahceli; editing by Dhara Ranasinghe and Nick Macfie)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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