THE Covid-19 crisis has been a burden on government debt in many countries and has resulted in debt as a percentage of GDP rising to new heights, though it seems that rating agencies have shown pressured governments some patience.

Italy is an example where patience has been shown, particularly due to large economic aid packages from the European Union, but now Moody’s has announced that it is losing its patience. It’s still just a change in the rating outlook but credit ratings usually go toward the indicated direction, which is also a sign of everyday life returning for bond investors. The current interest hikes may very well turn out to be nothing compared with the next danger waiting around the corner.

The report that came along with Moody’s new credit assessment of Italy is comprehensive and has been well-referenced in some media. The short version is that Moody’s maintains the actual credit rating, called “Baa3,” which corresponds to “BBB-” at Standard & Poor’s. The change is that Italy is on “negative outlook” regarding expectations for the future.

In my world, it is only a matter of time before Italy loses its currently valuable credit rating and thus gets the status of “highyield” or “sub-investment grade.” Some will even use the term “junk bond,” which I think is a bit dramatic. Neither Italy nor other countries and companies in the same situation need to be “junk” because their credit rating is not in the upper half of the scale.

“High-yield” will certainly be able to express the country’s government bonds someday. It will be serious enough in itself because it will confirm the country’s structural economic negative spiral. In the future, a solution could probably still be found so that the European Central Bank can buy up Italian government bonds. Even