Italian government bonds came under selling pressure on Monday, while other euro area debt saw gains.

The reason for the poorer development of Italian bonds was the negative outlook that the rating agency Moody's announced on Friday evening.

The credit checkers had previously classified the prospects of the heavily indebted country as stable.

Should the negative outlook result in a downgrade, Moody's would deprive Italy of investment grade status.

The rating is currently "Baa3" and thus at the last investment grade level.

Markus Fruehauf

Editor in Business.

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The yield on the 10-year government bond rose to 3.02 percent on Monday after falling below 3.0 percent the previous week.

The risk premium compared to ten-year Bunds was 2.14 percentage points on Monday and thus significantly lower than in the middle of last week with just under 2.40 percentage points.

The analysts at Moody's justified their more skeptical outlook with the political uncertainties following the end of the government led by Mario Draghi and the new elections that are now imminent.

They see the timely implementation of important reforms as part of the EU recovery fund at risk.

In addition, bottlenecks in the energy supply threatened economic development.

The Moody's analysts name lower growth, higher refinancing costs and slacking budgetary discipline as risks for public finances.

"The risk of a further downgrading to junk is increasing in view of the possible political situation after the elections on September 25," commented analysts at Dekabank on Moody's decision.

The rating agency S&P Global canceled the positive rating outlook for Italy at the end of July.

Both S&P and Fitch have rated Italy at “BBB”, two notches above the range that is no longer considered worth investing in.

The three right-wing parties Fratelli d'Italia, Lega and Forza Italia lead in polls.

The strongest force could be the post-fascist Fratelli d'Italia, whose leader Giorgia Meloni wants to become prime minister.