Presented with little comment, except to say reality is returning as credit markets are starting to price in some disappointment. Italy 5Y is underperforming as the basis trades we mentioned yesterday are unwound and Italy 10Y has broken back over 6% as their curve remains inverted. Spanish 10Y spreads are up over 35bps today and 50bps from yesterday's tight print as Belgium and Italy follow suit. The swing in Spanish 10Y spreads, on a percentage basis, is massive, empirically, from a 4.5 standard deviation compression on Monday to a 2.5 standard deviation decompression today as today's widening in the biggest relative jump since July 11th - more small doors and large crowds?
10Y Sovereign spreads across Europe are accelerating wider today as reality sets back in.
On a percentage basis, Spanish 10Y spreads dropped over 17% (4.5 stdevs) on Monday and then jumped almost 12% today (2.5 stdevs). How is that going to help with asset allocation and risk budgeting?