Italy downgrade triggers inflation bond sell-off

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Prices on Italian government inflation-linked debt dipped before the weekend as a two-notch downgrade by Moody's Investors Service kicked the sovereign out of a key Barclays index – and dealers expect a new issue of inflation bonds, planned for the end of this month, to be cancelled.

Under the rules of the Barclays inflation-linked bond index, countries are ejected when they are rated lower than A3 or A- by two of the big three rating agencies. Standard & Poor's already rated Italy below this

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