Moody’s Investors Service downgraded Italy’s bonds to just one level above junk bonds, Bloomberg reports. Agency is concerned about financial stability of the country as well as delayed plans on structural reforms of the economy.

Credit rating was reduced to Baa3, outlook was changed to stable.

Current situation with the country’s budget resulted in local debt’s selloff recently. Budget deficit for 2019 (2,4% of GDP), as well as so-called structural deficit exceed limits set by EU.

Meanwhile, Italy’s public debt is about 130% of GDP (2,3 trillion euro), which makes the country’s economy very vulnerable to external and internal turmoil, particularly, to weaker economic growth. According to the government’s forecast, growth next year will be 1,5%, and then 1,6% and 1,4% next two years. Average number according to Bloomberg survey is 1,1%.

According to Reuters, yield of Italy’s bonds fell on Monday due to stable outlook on behalf of Moody’s despite of rating downgrade. Yield of 10-year bonds fell by 19 basis points to 3,39%. Spread between yields of Italy’s and Germany’s bonds tightened to 289 points.