Italy’s stock index, the FTSE MIB, was down nearly 2% on Friday while yields on government debt surged following a poor bond auction that highlights the markets’ elevated fear over Europe’s debt crisis.
The iShares MSCI Italy (NYSEArca: EWI), an equity exchange traded fund, is down nearly 30% year to date and was set for more losses on Friday. The sell-off has dragged the ETF dangerously close to its 2009 low in the aftermath of the global credit meltdown.
Exchange traded notes indexed to Italian bonds — PowerShares DB 3x Italian Treasury Bond Futures ETN (NYSEArca: ITLT) and PowerShares DB Italian Treasury Bond Futures ETN (NYSEArca: ITLY) — were also poised to open lower Friday.
The trouble in Italian bonds follows a weak auction in Germany earlier this week. [German Bond Auction Sends European ETFs Reeling]
“Italy paid a record 6.5% to borrow money over six months on Friday and its longer-term funding costs soared far above levels seen as sustainable for public finances, raising the pressure on Rome’s new emergency government,” Reuters reported.