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Italy 'can withstand high yields for some time', says BIS

Debt crisis has put Italian bonds under pressure

12 December, 13:00
Italy 'can withstand high yields for some time', says BIS (ANSA) - Rome, December 12 - Italy is not in danger of defaulting on its huge national debt in the short term, even though it is having to pay high yields with its bonds coming under pressure on the markets, according to a leading international financial body.

The spread between 10-year Italian Treasury bonds and the German equivalent, a key indicator of market confidence in Italy, rose from 421 to 465 in early trading on Monday.

The yield went up to 6.71%, back towards the 7% threshold that forced other states hit by the eurozone debt crisis to seek bailouts.

The yield on five-year bonds crossed the 7% mark, meanwhile, reaching 7.03%.

But the Bank for International Settlements (BIS) suggested Monday that, for the moment, Italy was not in danger of buckling under the weight of repayments of a national debt of around 120% of GDP.

''Simple simulations of the debt-service costs to the Italian Treasury in different yield-curve scenarios suggest that Italy should be able to withstand elevated yields for some time, provided it retains access to the market,'' the BIS said in its quarterly review. ''Given the relatively high average residual maturity of the Italian public debt, it would take a long time for elevated yields to translate into significant additional debt-service costs''.

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