Analysts at ING expect an eventful week in terms of Italian political developments, which may continue to fuel upside pressure on BTP rates.

• "After deputy prime minister Matteo Salvini broke the governing coalition last week, we highlighted three possible political scenarios for Italy, also noting how the balance of risks for the EUR and Italian bonds was likely tilted to the downside moving ahead. During the weekend, former prime minister Matteo Renzi (of the Democratic Party) showed interest in forming a coalition with the Five Star to deliver the 2020 budget and avert a VAT tax hike. This option – which may provide some short-term respite to market concerns – has been fiercely opposed by the current Democratic leader (Nicola Zingaretti) and a large part of Democratic MPs. Nonetheless, Renzi still has a number of followers in the parliament and may ultimately have enough seats to govern with Five Stars. It would remain to be seen whether Five Stars would accept the deal.
• All in all, we expect an eventful week in terms of Italian political developments, which may continue to fuel upside pressure on BTP rates. While EUR/USD will probably remain broadly attached to the 1.12 level. For now, we see room for more EUR/CHF downside towards the 1.08 region."