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Spanish And Italian Bonds Jump To Over 6%

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http://www.bloomberg.com/news/2011-08-02/italian-spanish-10-year-spreads-at-euro-era-records-on-growth-concern.html

Italian and Spanish 10-year bonds dropped, pushing yields up to euro-era records versus benchmark German bunds, on concern that slowing growth will hamper efforts to tame the nations’ debt loads.

German 10-year yields touched an eight-month low amid speculation spending cuts included in a U.S. debt-limit compromise agreement will harm the global economy. Investors pared bets on higher euro-region borrowing costs as European producer-price inflation slowed for a second month.

“This has all the features of a self-fulfilling crisis,” said Harvinder Sian, a senior bond strategist at Royal Bank of Scotland Plc in London. “The rise in yields looks pretty relentless, and it doesn’t look as if the politicians are anywhere near to getting ahead of the curve.”

The yield on 10-year Italian bonds rose six basis points to 6.06 percent at 3:20 p.m. in London. It earlier surged to 6.25 percent, the most since November 1997. The 4.75 percent security maturity in September 2021 fell 0.39, or 3.9 euros per 1,000- euro ($1,427) face amount, to 90.845. That pushed the difference in yield, or spread, over bunds, to as much as 384 basis points, the most since before the euro was introduced in 1999.

im suprised people havent paid much notice to this maybe its due to the sunny weather or the US debt issue dominating the news, but this is a massive issue.

italy and spain are tinkering on the edge now. if it reaches 7% it is unustainable and goes into greece territory.

if either spain or italy default it will make the greece problems look like a cake walk.

if they both default then it will be an absolute armageddon of the european economy.

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Spanish and Italian bond prices are following the greek route to oblivion. They at a price which they cannot afford already. By Sept/Oct the gamne will be up in the Eurozone as bail outs for Spain and Italy cannot be afforded and if done will be massively inflationary bond purchasing by an ECB who will simply have to print Euros to do it.

BBC this pm:

"Spain's Prime Minister Jose Luis Zapatero has been forced to postpone his holiday as investors continue to flee his country's debt.

Mr Zapatero had been due to leave for south-west Spain.

But on Tuesday, the yield on Spanish bonds reached 4.04 percentage points more than German debt - a record since the euro was introduced in 1999.

The so-called premium to hold Italy's debt also hit a record.

"The prime minister has postponed the start of his holidays," Mr Zapatero's spokesperson said. "He is keeping an eye on the international economic situation."

The latest spike in yields comes at a bad time for the Spanish government, which plans to raise as much as 3.5bn euros ($5bn, £3.1bn) in a bond auction on Thursday.

On Tuesday, the euro reached a record low against the Swiss franc. The currency is usually considered a so-called safe haven in times of turmoil.

Higher costs

Despite another bailout for Greece last month, the eurozone is struggling to contain fears that more countries will not be able to repay their enormous debts.

The Irish Republic and Portugal have both been bailed out, and Greece has been rescued twice.

And as the bond yields rise, Italy and Spain have seen their borrowing costs rise sharply in recent weeks.

Italy's 10-year bonds rose above 6% on Tuesday - a rate considered unsustainable.

The premium over the equivalent German debt also reached a record spread of 3.74 percentage points.

Italy has the largest sovereign debt of any European country.

As a percentage of output, Italy's debt is second only to Greece in the eurozone - whose huge debts have led to two bailouts.

Representatives from the Italian central bank and stock regulator Consob were set to hold discussions on "the sovereign debt market situation and implications for the banks and the economy".

As their countries' bond yields rise, it becomes more expensive for governments to sell more debt, which leads to a vicious circle as the old debt comes due for repayment.

On Tuesday, Germany - the biggest economy in Europe - saw its bond yield drop below the inflation rate for first time since reunification.

This suggests that investors are now so scared, they are willing to sacrifice a return on their investment to hold the least risky bonds in Europe."

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best if he carried on with his holidays....fat lot of good his attentive approach has done the Country....best he stay out of it.

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not really, those are generic threads. this is very recent news.

It's been going on for a few days now.

Interestingly enough the wording you used in this thread is is actually very similar to mine here :D

I guess few people on here have noticed, with all eyes on the US debt ceiling debate, but 10yr BTPS are now pretty much back at pre-bailout 2 levels. Same goes for Spanish 10yr bonds.

Watch this space ...

Aaaanyway, yes at these levels both Italy and Spain are in big trouble.

Better increase the size of that EFSF sharpish :P

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The european central bank will end up buying bonds as part of an asset purchase scheme, just like the BoE did/does.

Arent they doing that already?

Does anyone have a theory as to why the UK gilts are now yielding record lows, when the UK is effectively bust, and inflation is way above the yield on a ten year note?

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Arent they doing that already?

Does anyone have a theory as to why the UK gilts are now yielding record lows, when the UK is effectively bust, and inflation is way above the yield on a ten year note?

The UK looks like a safe haven next to the PIIGS.

Thankfully there's no chance of there being a bankrupt government behind doors 1, 2, and 3.

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Does anyone have a theory as to why the UK gilts are now yielding record lows, when the UK is effectively bust, and inflation is way above the yield on a ten year note?

This suggests that investors are now so scared, they are willing to sacrifice a return on their investment to hold the least risky bonds in Europe.

I guess that we still look like a relatively good bet compared to everyone who isn't Germany/Switzerland.

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Don't worry the worlds problems have been solved with even more debt.

I'm going to become the greatest debt advice consultant on the planet all these fools like Martin Lewis advising people to pay debt off, clearly they've got it wrong just keep borrowing and when your in trouble borrow some more.

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Italy calls emergency meeting as eurozone crisis resurfaces

Telegraph headline.

Mr Tremonti is also due to speak with EU commissioner Olli Rehn, later today and will meet eurogroup chairman Jean-Claude Juncker in Luxembourg on Wednesday for further discussions.

With Europe's politicians on summer break, analysts said markets were renewing their fears that Europe’s aid package for Greece and other bailed-out nations was not enough to prevent wider contagion.

Clearly the Greece bailout wasn't enough we need to generate more debt, everyone should have been given 1tr Euro debt at the point of the Greek bailout then we could all sit back and relax for a bit.

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The european central bank will end up buying bonds as part of an asset purchase scheme, just like the BoE did/does.

More pretend money heaped upon unserviceable debts! Well, that's obviously the answer!!

The contagion has begun and will not stop until the REALITY actually dawns on world govts - you have borrowed so much you are bust. The rating agencies are circling like sharks and the bond markets know the truth already. They are just adjusting to risk on a daily basis.

WOULD YOU BUY A GOVT BOND AT THE MOMENT? ......No, I thought not. That's just what everyone else is beginning to think. What a waste of time the last two years have been, propping up this and subsidising that. None of it can work in this climate where the whole western world has spent itself to oblivion in the biggest financial orgy of all time.

I am an optimist and wish no one any misery. But better to get the pain over with than make it worse by taking more debt and painkillers, only to find an amputation is required instead.

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The european central bank will end up buying bonds as part of an asset purchase scheme . . .

Only if it has guarantees.

If you have been following the Big Fat Greek Rescue Fudge, you will note that the ECB won't do anything without a guarantee from the so-called creditworthy EU states. The ECB can only play in the market with this diminishing cred. (Only 6 of 26 Eurozone states are AAA,)

French and German taxpayers might have reluctantly gone along with the Greek bailout, since it was indirectly bailing their own banks.

But how much longer will the likes of the Finns and the Dutch go along with all this? Or even the Germans, since French banks are most exposed to Spain.

I think this whole EU idea of collective debt has to fall apart at some time. It simply isn't in most countries' or local taxpayer's interest.

Edited by copydude

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Looks like we're getting close to the endgame of this drama. This was the worry that eventually Spain and Italy would start to go. Germany will have to make a choice at some point, either all in or out for the EURO. So far they have successfully kicked the can down the road at great cost.

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Does anyone have a theory as to why the UK gilts are now yielding record lows, when the UK is effectively bust, and inflation is way above the yield on a ten year note?

Because our banks are forced to buy them, I think they snap up over 80% of them. Neat huh

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  • 276 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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