Italy's crisis could lead to 3 different scenarios for its volatile bond market

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Italy's fresh political crisis has left investors contemplating how to trade its sovereign bond market which has seen significant volatility over the last few months.

. President Sergio Mattarella will hold consultations with various parties in Parliament in the coming days to see whether there is a working majority which would avoid the need for fresh elections.

The spread between Italian and German bonds could fall below 200 basis points in this scenario, Hense told CNBC. He explained that M5S and PD could compromise to put together Italy's 2020 budget, due in mid-October, that respects the EU's fiscal rules. This would mean that investors would see fewer risks when purchasing Italian debt.Chief investment officer UBS wealth management

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