Foreign Policy Blogs

What Flipped the Switch on Italy?

No, it was not a bunga bunga party (not this time at least). Rather, the bond vigilante feeding frenzy recently let loose upon Rome was triggered — depressingly — by the resolution of the (immediate) crisis in Greece. Basically, investors are playing whack-a-mole with Europe sovereigns. This July 6 piece from Bloomberg explains it all:

“Now that an immediate Greek default has been avoided [the final austerity measure was passed a week prior–ed.], investors are looking for ways to play continued distress among countries including Italy, the euro-area’s third-largest economy, and Spain, its fourth… The yield on Italy’s 10-year bond reached the highest in almost three years.”

For many investors, returns continue to be unsteady, and since Europe has yet to present a united front in resolving this crisis, this “play” has, unfortunately, much to recommend it.

 

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