Italian 10 year government bonds up – spreads falling

The 10-year Italian govt bond yield is massively down to 4.33%, its lowest level in 2 years.

Remember that just one year ago Italy would have to pay over the critical 7% mark, which is widely regarded by markets as unsustainable, to issue new 10-year debt.

I will give the credit for the yield drop (bond prices going up) in peripheral government bonds to the ECB rhetoric and bond buying operations, which of course provide no real solution to the problem and as usual kick the can down the road and are highly manipulative and obscure, but markets seem to like those “measures” for the time being.

As regards to Italian bonds in particular I would underline the rather high credibility of the country’s government with markets. Political developments in Italy during the next months will be of big importance to the whole of Eurozone.

It seems that investor euphoria from the end of last year has carried over to 2013 and is driving up risk assets.

Most major stock indices at multi-month or multi-year highs, gold higher at 1683, but EUR/USD unspectacularly bound on the 1.32/1.33 range of the last two weeks.

Petros