Trump Said to Offer Italy Bond Buying Help, Corriere Says

(Bloomberg) -- President Donald Trump told Italian Prime Minister Giuseppe Conte the U.S. is willing to help the country by buying government bonds next year as Italy seeks to refinance its debt, Corriere della Sera reported, citing three high-level Italian officials.

Conte is said to have told officials about the offer after returning from his meeting with Trump at the White House about three weeks-ago, the newspaper said. Conte didn’t give any details on the plan or say whether it’s feasible, Corriere added.

Italy’s bonds have been roiled in recent months by the Five Star Movement-League coalition and its plans to boost spending while cutting taxes in their September budget. The 10-year yield spread over Germany could blow out to 470 basis points -- the highest level since the euro area debt crisis -- from around 275 currently, should the budget break the EU’s deficit limit of 3 percent. The spread was little changed Friday.

“I laughed quite a lot, when I saw the report,” said Jan von Gerich, chief strategist at Nordea Bank AB. “I am not aware of any portfolios that he has direct control over.” Trump could probably use his clout to try to persuade domestic investors or public pension funds to buy “but that would most likely amount to something nominal rather than significant amounts.”

Trump has frequently expressed his support for anti-immigration movements in Europe and political leaders who challenge the established European Union order. League Party leader Matteo Salvini and his populist ally, Luigi Di Maio of the Five Star Movement, have been demanding the EU bend its rules on deficit targets to allow them to boost spending and cut taxes. They have also tied Italy’s EU contributions to the immigration issue, a stand that has also roiled Italian bonds.

Italy’s deficit this year is forecast to be 1.6 percent of economic output, well within the euro zone’s limit of 3 percent.

Salvini separately told Corriere that he sees signs of an economic attack against the country. He said Conte did the right thing by meeting Trump and praised the finance minister’s plan to travel to China to seek investors. "We have to be open to every scenario," he said.

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