Italy’s Investors Are Turning a Blind Eye to Politics

  • Valuations still make Italian debt attractive, says HSBC
  • Investors are biased toward holding BTPs, says Rabobank

Italy’s bond investors are looking beyond heightened political risks as cheap valuations on the nation’s debt relative to its peers make it attractive.

Bondholders are justifying buying Italian securities on the back of improving economic growth and the recently formed grand coalition in Germany, which boosts the prospects for euro-area integration, according to Rabobank International. HSBC Holdings Plc would likely be among those buyers.

While Italian 10-year securities slipped Monday after reports that Matteo Salvini, leader of the League party, would start talks with the head of the Five Star Movement Luigi Di Maio, yields are lower than before Italy’s March 4 election. The yield touched the lowest since mid-December last week, thanks in part to the relative cheapness versus Spanish bonds.

“The uncomfortable upshot of this analysis, however, is the fact that it leaves one flying blind,” Rabobank strategists led by Richard McGuire wrote…

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