Italian Bonds Tumble, Triggering Goldman "Contagion" Level As Political Crisis Erupts In Spain

When it comes to the latest rout in Italian bonds, which has continued this morning sending the 10Y BTP yield beyond 2.40%, a level above which Morgan Stanley had predicted fresh BTP selling would emerge as a break would leave many bondholders, including domestic lenders with non-carry-adjusted losses...

... there has been just one question: when does the Italian turmoil spread to the rest of Europe?

One answer was presented yesterday by Goldman Sachs which explicitly defined the "worst-case" contagion threshold level, and said to keep a close eye on the BTP-Bund spread and specifically whether it moves beyond 200 bps.

Should spreads convincingly move above 200bp, systemic spill-overs into EMU assets and beyond would likely increase. Italian sovereign risk has stayed for the most part local so far. Indeed, the 10-year German Bund has failed to break below 50bp, and Spanish bonds have increased a meager 10bp from their lows. This is consistent with our long-standing expectation that Italy would not become a systemic event. That said, should BTP 10-year spreads head above 200bp, the spill-over effects onto other EMU sovereigns would likely intensify.

Well, as of this morning, the 200bps Bund-BTP level has been officially breached. So, if Goldman is right, it may be time to start panicking.

Ironically, almost as if on cue, just as the Italy-Germany spread was blowing out, a flashing red Bloomberg headline hit, confirming the market’s worst fears:

  • SPANISH SOCIALISTS REGISTER NO-CONFIDENCE MOTION AGAINST RAJOY.

This confirmed reports overnight that Spain's biggest opposition party, the PSOE or Socialist Party, was pushing for a no-confidence motion again Spain's unpopular prime minister. The no-confidence call follows the National Court ruling on Thursday that former Popular Party officials had operated an illegal slush fund, as a result of which nearly 30 people were sentenced to a total of 351 years in prison.

And while Spain's anti-establishment party Podemos has already called for a Raoy no-confidence vote, the Socialist Party joining that call makes this outcome more likely, but would still need the support of one more party as just these two do not guarantee Rajoy's exit, and a Rajoy overthrow depends on the participation of market-friendly party Ciudadanos, Spain's 4th largest party.

Well, following this headline, Rajoy's political future suddenly appears to be over as Ciudadaons, which holds the balance of power in Spain's government, just gave the PM a thumbs down.

  • CIUDADANOS WILLING TO BACK NO-CONFIDENCE VOTE AGAINST RAJOY

Immediately after the news, the selling started with Spain's 10Y bonds erasing day's gains, with the yield now higher by 4bps on the day, while Spain's Ibex slumped, falling as much as 0.9%.

Which means that, while independent of the Italian bond rout, Europe's political crisis may very soon have not one epicenter, but two: Rome and Madrid.

Comments

mark1955 Pearson365 Fri, 05/25/2018 - 07:08 Permalink

There was NO "Shooting"!!!

 

Alleged "Good Guy with a Gun" shooting, outside Oklahoma restaurant, Was an FBI STAGED Farce, similar to the "Good Guy" with a gun" ALLEGED shooting last week, by an Illinois school security guard several days before the Santa Fe  High School False Flag!

 

This Oklahoma False Flag, is a Giant "Heads-Up", that there is going to be another FBI STAGED False Flag between today and Monday!

 

The FBI doesn't like to go in "Cold" and usually likes to Try and STAGE a Well-Publicized smaller "Shooting", before they launch their Bigger STAGED Mass "Shootings". Several days before Sandy Hoax, the FBI Staged a False Flag shooting at an Oregon Shopping Mall.

 

Also, several Days before the FBI STAGED Boston Marathon Bombing, the FBI Tried to stage a Shooting at a Christianberg Virginia shopping mall, to Try and "Grease the skids" with the American people, to more readily make following "Shootings" more "Believable"...Please Don't Fall For it and DEMAND HD Video proof!

 

 

In reply to by Pearson365

Dilluminati Pearson365 Fri, 05/25/2018 - 07:21 Permalink

Funny but when the news article finished there was some cocksucker news network video about gun control, and "good gun control" is what the "good guy" showed today by taking down that shooter with a "good single shot" and sparing us the costs of a trial, incarceration, and a media circus.  

 

In reply to by Pearson365

mark1955 Dilluminati Fri, 05/25/2018 - 07:26 Permalink

There Was NO "Shooting"! 

 

The FBI Staged a similar "Good Guy with a Gun Shooting" last week, by an Illinois School security guard, several days before the FBI STAGED: Santa Fe Texas High School False Flag! 

 

The fact, that CNN and other left wing outlets, gave both the Illinois and Oklahoma "Good Guy with a Gun" alleged shooting a lot of "Play", should make everyone suspicious!

 

Fully expect another FBI STAGED FALSE FLAG in the next several days and DEMAND HD Video Proof!

In reply to by Dilluminati

mark1955 Dilluminati Fri, 05/25/2018 - 07:43 Permalink

I'll believe any of these alleged  Mass "Shootings", when I see one start to finish, HD Video of an entire mass shooting.

 

The Fact that we don't ever see any video, ( Even in Las Vegas ) where if you cheat at Black Jack, the Casino security will take you in back and show you footage from when you got off the plane, till you sat at the Casino table Yet when there's an alleged mass shooting, suddenly every camera in Las Vegas goes out showing the actual shooter allegedly "Shooting", is beyond suspicious!

In reply to by Dilluminati

Let it Go U. Sinclair Fri, 05/25/2018 - 07:47 Permalink

Recently Draghi warned, "we can't declare victory over inflation yet." This is where Euro-zone watchers point to the continuing problems in countries such as Italy, Spain, and Greece. The fact is that for all the stimulus thrown at it overall euro-zone growth remains tepid.

Unfortunately, much of the problem is rooted in the fact the euro itself was constructed on a weak and flawed foundation. Any currency joining and binding states or countries together must allow for an adjustment to send back funds to its weakest part or eventually it will become unbalanced and fail. More on the problems that haunt Europe in the article below.

http://Euro-zone Growth Tepid-Euro Will Suffer.html

In reply to by U. Sinclair

Arnold gatorengineer Fri, 05/25/2018 - 07:18 Permalink

Mem'ries, in the corner of my mind...
Misty water-colored mem'ries of the way we were
Scattered pictures of the smiles we left behind
Smiles we gave to one another for the way we were
Can it be that it was all so simple then
Or has time rewritten every line
If we had the chance to do it all again, tell me, would we, could we........

https://www.zerohedge.com/news/2017-05-18/deutsche-bank-accused-running…

In reply to by gatorengineer

CaptOveur Fri, 05/25/2018 - 06:50 Permalink

Does someone have an explanation of why a sane person would voluntarily purchase Italian bonds? (Or Argentinian.) Do they look like magic beans or something? Do they come with a complimentary hooker? I just don't get it.

hooligan2009 Fri, 05/25/2018 - 06:55 Permalink

EU/ECB: "veni, loquebatur, futuit sursum".

wassa matter libtard socialists??

are there no quality outcomes obtainable using socialist dogma that spends other people's past, present and future wealth on fraud, sloth, an "entitlement mentality" and delivering inferiority at every turn in your never ending quest for the lowest common denominator?

SadhakaPadma Fri, 05/25/2018 - 07:22 Permalink

then Athens and Lisbon......PIGS are going to burn euro and move geopoliticaly eastward...chinesse are going invest iinto their ports and help them recover.

mklrnzn Fri, 05/25/2018 - 07:29 Permalink

The yield is now what ? Uh Oh someones losing and someones winning. Meanwhile back at the ranch...Good guy carrying gun kills bad guy who shot a little girl and her mom in Oklahoma City restaurant.

 

Let it Go Fri, 05/25/2018 - 07:41 Permalink

 While the US and the UK were mired in political chaos during 2017 the EU claimed it was experiencing improved economic conditions. It appears this did little to move Europe in the direction of implementing long-needed EU and eurozone reforms.

Until the EU is prepared to do “whatever is necessary,” to paraphrase ECB chief Mario Draghi, in order to protect retail bank depositors, the EU will remain far from being a united political economy. More on this subject in the article below.

 http://EU Banks Remain Massive Problem.html

CashMcCall Fri, 05/25/2018 - 08:10 Permalink

Still trying to figure out how Trump can intervene and move into the media spotlight to cause more problems for everyone in Europe and around the globe.