S&P reaffirms Italian debt at BBB-, cuts GDP forecasts

Ratings agency Standard&Poor's cut its growth forecasts for Italy but reaffirmed its rating on the country's long-term debt.

Following their latest review, S&P slashed its projections for the rate of growth in Italian gross domestic product in 2016 and 2016 from 1.1% and 1.3% to 0.9% and 0.8%, respectively.

The agency also reaffirmed its BBB- rating on the Mediterranean government's long-term debt and stuck with their 'stable' outlook for the same.

"The stable outlook reflects our expectation that the Italian government will continue to implement growth-enhancing structural and budgetary reforms that stabilize and reduce high public debt," S&P said in a statement.

Commenting on the country's upcoming constitutional referendum, S&P said that if it were passed it could benefit the government's stability and effectiveness.

Nonetheless, "if the referendum is rejected, we do not believe this would be significant for Italy's creditworthiness, unless it leads to a reversal of structural reforms."

As of 1722 GMT the yield on the benchmark 10-year Italian government bond was higher by 12 basis points to 2.02%.

Yields on similarly-dated German Bunds were only higher by three basis points to 0.31%, pushing the spread between the two to 171 basis points.

By way of comparison, 10-year Spanish bond yields were eight basis points higher at 1.47%.