Despite Italy’s colossal public debt, rising political risk and an economy languishing in recession, the country is possibly having one of its best quarters as Italian government bond yields fall to fresh lows and the treasury wraps up its 2012 funding needs with aplomb.
Its a striking change from where Italy was 12 months ago wheninvestors fears over the countrys ability to service its debt soared, accelerating foreign capital outflows and dangerously forcing Italian 10-year government bond yields up to highs of above 6.5%.
Today, however, 10-year yields have fallen to around 4.5% the lowest level for more than two years as foreign institutional investors have moved back in to Italian government bonds, and the country has ably demonstrated it can fulfill its funding needs.
Indeed, in October Italy not only demonstrated its access to the bond markets, but demonstrated how very different it is from other eurozone countries when it sold a staggering 18bn of four-year inflation-linked bonds largely to Italian retail investors.
It was the largest single bond issue ever, and at a stroke highlighted one of Italys unique strengths its wealth.
Italy has the highest ratio of private wealth to public debt of any G7 country at around 3.6 trillion, and with overall private sector debts that are modest by developed country standards, Italians are therefore flush with cash to support their countrys debts.
It is a source of investment most eurozone periphery countries, and perhaps Spain particularly, would love to be able to draw on but the reality is no other eurozone country has such a deep pool of savings wealth nor long history of raising funding from retail.
Italy still faces some very real challenges and has benefited greatly from the European Central Banks OMT or bond buying programme, but if there was ever a transaction that illustrated Italy's strength and how willing and able Italians are to support their country in tough times, the October deal is it.