Investors taking 'no chances' on Italy as short interest, CDS spikes

Bets on falls in Italian stocks and demand for insurance against sovereign default have both picked up markedly this year on growing investor concern ahead of Sunday's referendum on constitutional reform, according to data firm IHS Markit.
The country's blue chip index has lost more than a fifth of its value so far this year while government bond yields have spiked as the potential fallout of the referendum dented the appeal of holding Italian assets.
Prior to a polling blackout, surveys showed that a "No" vote is likely to prevail in Sunday's referendum, derailing Prime Minister Matteo Renzi's plans for reform.
"The market is taking no chances with regards to Italy's upcoming referendum as both equities and credit investors are actively seeking protection heading into Sunday's vote," IHS Markit said in a note.
The information and research company said that Italy's credit default swap (CDS) spread had jumped to 184bps in recent weeks, as investors have sought insurance against sovereign default. The spread is at same level registered in the immediate aftermath of Britain's vote to leave the European Union.