Posted on 11/09/2011 3:00:45 AM PST by TigerLikesRooster
EURO GOVT-Italian 10-year yields rise above 7 percent
5:24am EST
* Italian 10-year yields top 7 pct
* LCH.Clearnet SA. margin increase on Italian debt hits BTPs
* Yield curve inverts, reflecting repayment nerves
By Marius Zaharia
LONDON, Nov 9 (Reuters) - Italian 10-year bond yields topped on Wednesday the 7 percent level widely deemed unsustainable after an increase in the cost of using the country's bonds to raise funds offset hopes for more reforms in Italy as its prime minister agreed to step down.
A 7 percent yield was seen by many in markets as a red line as countries such as Portugal and Ireland were forced to seek financial aid after yields on their bonds exceeded that level.
The rise, which followed a move by clearing house LCH.Clearnet SA to increase the margin call on Italian debt , drove the 10-year yield premium over safe-haven German debt above 500 basis points or the first time in the euro era.
"A lot of people are talking about this level. If it's there for the short term it does not make a difference, but it really does feel like it's a bit of an end-game at the moment," one trader said.
/snip
Investors will be on alert or any signs that the European Central Bank is willing to step up its Italian bond purchases.
"The problem is that in some ways it is almost impossible for them to withdraw until there is an alternative buyer," Jenkins said.
"If they announce today that they are not going to buy Italian bonds and there is no alternative buyer we will go to double-digits (in Italian yields) in a heartbeat."
The ECB has said its bond purchases are conditional on Italy pursuing reforms.
(Excerpt) Read more at reuters.com ...
P!
All things considered....I’d say that by April...both Italy and Greece are out of the Euro business. The snow-ball affect will be causing other countries to consider retreat. So I’m making this odd prediction by July of 2012....the dollar at some amazing high, mostly for the screwed up affairs of European countries.
If the dollar reaches some “amazing high” as you suggest, the price of oil will plummet along with gasoline prices not to mention the cost of other imported goods. This will kick consumer spending up and help the economy.
It will however cause the coat of goods we make here to rise which will hurt exports.
Maybe, but more likely the Euro rallies as it looks more likely that
It will break up. Without the PIIGS the euro starts resembling the
DM which would probably be around 2.50 if it still existed.
Don’t ask me about the JPY. I can’t get my head around that one.
Before you know it, they’ll be right up there with Greece, paying ‘subprime’ credit card like interest rates. Eventually these aren’t interest rates, as much as they are implied recovery value with the ‘haircut’ priced in. lol
Yes, and combine that with inflation at home which pushes prices even higher and American business is screwed again.
Japan and Germany have maintained their industrial bases despite strong currencies because they've maintained price stability at home. Those stable prices work to counteract the negative effects of rising foreign exchange rates.
Our geniuses in Washington have never figured that out. Of course, I really don't think they care.
I wish I understood bond markets better.
Who doesn’t always remember being told bonds were the ‘safe’ investment.
Futures tanking.
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