Italian elections will be held this weekend and the indebted country will issue bonds early next week, which will be the market's first reaction to the election outcome. The scandal plagued Berlusconi has surged in another resurrection of the ex PM of bunga bunga fame. Mario Monti the technocrat PM who was installed as the euro crisis unfolded with Italian bond yields rising pass 6%. According to Reuters:
"Italy may have to pay a big premium to sell bonds next week if the market gets rattled by an indecisive election result that puts in doubt reforms needed to spur growth and cut the country's debt.
A sale of inflation-protected bonds on Monday will be the first test of investor demand as Italians go to the polls to choose a new government that will have to deal with the country's mammoth €2trn of public debt.
This will be followed up by an auction of an estimated €7bn of conventional bonds on Wednesday, expected to include a new 10-year benchmark paper. The Italian Treasury [is] the sole scheduled issuer in the euro zone primary market next week.
Markets are widely expecting the centre-left party of Pier Luigi Bersani to win the February 24-25 vote and rule in coalition with technocrat centrist Mario Monti, with a comeback by former Prime Minister Silvio Berlusconi - reviled by markets - largely dismissed.
This has kept Italian bond yields steady in recent weeks after an initial sell-off in early February, with benchmark 10-year debt yields within the 4.10%-4.75% range that has prevailed so far this year." (Reuters, guardian.co.uk)