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MILAN, Nov 20 (Reuters) - Rising yields on Italian government bonds drove up bank lending rates in October, the country’s banking association ABI said on Tuesday.
Italian banks have come under pressure due to a sell-off in state debt driven by the spending plans and anti-EU stance of a new populist government. Banks have seen their funding costs rise and capital buffers eroded by the rising bond yields.
The latest spike was triggered by the government’s decision in late September to target a budget deficit of 2.4 percent of gross domestic product next year up from 1.8 percent in 2018.
ABI said the cost of new bank bonds stood at a 1.71 percent in September up from a low of 0.56 percent in May when the anti-establishment 5 Star Movement and right-wing League first joined forces.
Forced to pay more for funds, Italian banks have started to pass on the extra costs to customers, data showed.
The average rate on new corporate loans edged up to 1.60 percent in October from 1.45 percent a month earlier. The average rate on new home mortgages rose to 1.87 percent from 1.80 percent.
Reporting by Valentina Za