Italian Bonds Fall, Stocks Rise as Meloni’s Bloc Wins Majority in Election

Italian Bonds Fall, Stocks Rise as Meloni’s Bloc Wins Majority in Election

By Jeffrey Smith – Italian BTPs led the decline in euro zone bonds on Monday, after a right-wing bloc led by Giorgia Meloni won a majority in Italy’s parliamentary elections.

The elections made the Meloni Brothers of Italy party the largest in both the Senate and the Chamber of Deputies. As such, the next Italian government is likely to be led by a party that in the past expressed sympathy with the fascist policies of former dictator Benito Mussolini.

Meloni softened her rhetoric during the election campaign and indicated that she would press ahead with the economic policies requested by the European Union to unleash tens of billions of euros in post-pandemic aid that would be needed to rebuild the country’s economy.

The yield on benchmark bonds rose 12 basis points to 4.48% at the open, while the yield on banknotes – a more direct reflection of pressure looming in eurozone debt markets – rose by just 10 basis points to 3.13%.

While the move was sharp, it came on a morning of public concern in global bond markets about the potential for European policy to crack under the pressure of the ongoing energy crisis. The yield also increased by 7 basis points to 2.10%, while the yield on banknotes increased by 5 basis points to 1.96%.

In contrast, Italian stocks welcomed the result, which promises a broadly pro-business agenda from the incoming government. The index opened 0.2% higher, making it the second best performing indicator in Europe.

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