The iShares MSCI Italy Capped ETF (NYSEArca: EWI), the largest US-listed exchange traded fund dedicated to Italian equities, is lower by more than 16% year-to-date. That is enough to make EWI one of the worst-performing ETFs tracking a developed economy.

EWI is not the only ETF being pinched by problems in the Eurozone’s third-largest economy. Some fixed income ETFs with exposure to Italian bonds are being pinched as well. That includes the Vanguard Total International Bond ETF (NasdaqGM: BNDX) and the iShares International High Yield Bond ETF (CBOE: HYXU).

Last week, the European Commission formally notified Italy that its 2019 budget plans were a serious problem and required “clarification” over the “unprecedented” deviation from E.U. rules, AFP News reported.

“The lack of contagion to other peripheral eurozone issuers, while welcome, should not lull investors into a false sense of security,” said Morningstar in a recent note. “Italy’s problems on their own do matter–a lot, in fact. Italy has the largest government bond market in the eurozone and the third largest in the world after the United States and Japan. This means that passive funds providing exposure to international sovereign bond markets, which for most U.S.-based investors are a tactical investment, can have a large weighting in Italian bonds.”

Rough Sledding

Meanwhile, bond investors have also been selling off Italian debt in response to the concerns, with yields on 10-year government debt hitting their highest since 2014.

HYXU, which tracks the Markit iBoxx Global Developed Markets ex-US High Yield Index, allocates nearly 20% of its weight to Italian bonds, its largest country weight by almost 330 basis points.

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