Telecoms bondholders face another painful week after a sharp fall in the price of Europe's largest corporate bond issue.

Spreads on the bonds issued last year by Tecnost, the financing arm of Olivetti, widened by a massive 70 basis points relative to government equivalents on Friday after Standard & Poor's put the company on watch for a possible downgrade. In what bankers described as an unusually bearish tone, the ratings agency warned that, even after the downgrade, the company is still likely to carry a negative outlook.