The ‘spread’ rates are increasing significantly on Euro bond markets, while the announced departure of Silvio Berlusconi fails to reassure investors about the Italian political crisis.
Thus, the 10-year yield from the requirement of an Italian climbing sixty basis points to 7.38%, while that of the German Bund lost six basis points to 1.74%, a difference of 560 points base about.
‘A differential rate higher than 600 basis points and a 10-year yield above 8% has consistently led to an intervention of Europe and the IMF at the relevant European countries (Ireland, Greece, Portugal)’, said a manager Barclays stock.
Having lost the majority in parliament in Rome because of the defection of his allies in the Northern League, Berlusconi announced that he would hand once enacted austerity measures presented in Brussels in late October, then at the G20 last week.
Announced his departure, however, leaves Italian politics into confusion: no name appears for now to be emerging to replace the ‘Cavaliere’ and carry the fight against the national debt, which is about 120% of GDP.
Beyond the Italian case, the weakest bond markets suffer from the situation in Greece, where the new government is still the subject of numerous negotiations between the two major parties.
‘One of the most surprising of the current crisis is that bond investors seem to expect more turbulence in the euro area equity investors’ note Ad van Tiggelen, senior strategist at ING IM.
