Italy 5 year yield spreads blow out to record wides

Today we had one of the biggest ever days of peripheral sovereign bond buying from the SMP (Securities Market Programme), with some banks estimating that over €5bn of peripheral sovereign bonds were purchased via the ECB’s bond buying program in an effort to keep a lid on peripheral sovereign bond yields. About two thirds of these purchases were directed towards Italian government bonds, and Italy spreads still ballooned out to Euro era wides. The top chart shows the absolute yield levels of Italian and German 5 year government bonds, and the bottom chart shows the difference in the yields, or the yield spread.

Not great news.

Italy 5 year yield spread hits record wides
UPDATE : more of the same this morning, Italy 5 year yield at 6%, and yield spread over Germany 5 year has broken through 500bps

Discuss Article

  1. Justin Pugsley says:

    It’s the steady EUisation of national debts and shows that this crisis is far from over. Draghi has his work cut out & is probably taking on one of the hardest central bank jobs ever. 

    The Eurozone leaders now have to put action to their words, something they tend to find as hard to do as agreeing action in the first place.

    I suspect the Eurozone crisis will continue to contaminate markets & sentiment through out next year making for any sort of economic expansion in the West very challenging.

    Posted on: 01/11/11 | 8:26 am
  2. Trevor Rothermere says:

    Once Germany caves, as it eventually will – since ultimately there’s no other practicable option in democracies – and the ECB is permitted to embark on an unconstrained print programme, FPIIGS yields can be manipulated to whatever levels they choose.
     
    The quid pro quo being: expect inflation problems in the second half of this decade to make the 70s experience seem like a sunny stroll through a scented meadow.
     
    That’s the optimistic scenario…

    Posted on: 01/11/11 | 9:17 pm

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