Thomson Reuters
- Huffington Post Italia leaked a government proposal late Tuesday showing that populist parties had drafted plans to ask the European Central Bank for debt forgiveness of €250 billion ($300 billion).
- Italy's 10-year yield hit its highest level in two months following the report.
- Bond yields in other eurozone countries also spiked, with the Greek 10-year rising 25 basis points.
Eurozone bond markets turned chaotic Wednesday after leaked documents suggested Italian coalitions paving the way for a new administration were floating plans to ask for €250 billion ($300 billion) in debt forgiveness for the country.
The cost of borrowing in Italy hit its highest level in two months, with the 10-year bond yield jumping 14 basis points, to 2.082%, its biggest daily move in nearly a year. The two-year was up 17 basis points, to 0.11%.
Meanwhile, the spread between German and Italian 10-year bond yields, an indicator of financial stress in the eurozone, was up to 144 basis points from 129.
Huffington Post Italia late Tuesday leaked a proposal[1] by the antiestablishment Five Star Movement and the far-right League — populist parties that came out on top in an inconclusive March election — outlining a plan to ask the European Central Bank for a writedown.
The 39-page document also pointed to the possibility of establishing a way for countries to leave the euro, a proposal floated by the parties in the past.
Five Star and the League released a statement hours after the draft was published[2], saying it was "an old version that has been considerably modified" and pushing back on the euro blueprint, adding that they decided "not...