Italy's Budget: Will it determine the fate of the country's beleaguered government bonds?

The election of an anti-establishment government in Italy sent investors fleeing and Italian government bonds (BTPs) witnessed record outflows earlier this year. Antonio Ruggeri, manager of the OYSTER European Corporate Bonds fund at SYZ Asset Management, argues recent BTP weakness is linked to fiscal policy uncertainty and could come to an end once a Budget proposal is tabled.

It would be wrong to assume markets are punishing the choices of the Italian electorate. The mess started in May this year, more than two months after the Italian general election. Populist coalition didn't faze BTPs During the election campaign and for the first few months after the election, anti-euro and anti-EU rhetoric was essentially dismissed by the Five Star and the League. Investors were expecting that whatever the government, Italy would continue on its fiscal path. WisdomTree's Gannatti: European equities still attractive despite Italy risk If we look at spreads versus...