Fitch Ratings late Friday revised its outlook on Italy's long-term foreign-currency issuer default rating, or IDR, to negative from stable, citing concerns about the country's fiscal outlook under a new government that took power earlier this year. The ratings firm said it now expects a degree of fiscal loosening that will leave Italy's "very high public debt more exposed to potential shocks." Fitch said downside risks to the fiscal outlook have increased since March partly due to the "new and untested nature of the government, sizable policy differences between its coalition partners" and inconsistencies between policy promises and its stated objective to reduce public debt. Fitch affirmed Italy's rating at BBB. Concerns about Italy's budget plans were blamed for a selloff in Italian government bonds that pushed the yield on 10-year paper TMBMKIT-10Y, +0.88% to 3.241, according to Tradeweb, the highest since May 2014, while the yield premium demanded by investors to hold Italian 10-year bonds over their German counterpart TMBMKDE-10Y, -6.21% widened by 5.9 basis points to 289.5 basis points, or 2.895 percentage points.
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