If Italy’s neo-anarchist “Grillini” had combined with anti-euro Lega nationalists two or three years ago to form an insurgent government, it would have set off panic in the bond markets.
Yet now that this twin-headed populist hydra is upon investors, risk spreads have barely moved. Yields on two-year Italian bonds ended last week at minus 0.10pc. Foreign funds are willing to pay Grillini-Lega management a custodial fee to look after their euros.
Bond purchases by the European Central Bank and negative rates have enveloped Italy with an enormous comfort blanket.
“Most investors think there is a snowball’s chance in hell that the ECB will let Italy go down, because it is the end of the European project if that happens,” said Nicholas Spiro from Lauressa Advisory.
The ECB has soaked up €300bn of Italian debt, buying time for the country to dig its way out of a debt-deflation trap.