Italy's Sovereign Risk Curve Inverts For First Time Since 2011 EU Crisis

Update: As Europe closed, investors flooded out of Italian assets, pushing the nation's sovereign bond yields to the extremes of the day and for the first time since Dec 2011, inverting Italy's sovereign risk yield curve...

Aside from the period from mid-Nov to Mid-Dec in 2011, the Italian risk curve has never been more inverted.

And while Italian "redenomination" risk has soared, today saw that risk spread contagiously to Spain...

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While prices for Italian bonds and stocks have already plummeted, investors are anything but convinced the bottom is in as the costs for protecting against downside risk has exploded to multi-year highs for stocks and bonds...

Italy's FTSE MIB stock market benchmark had fallen almost 14% in the last three weeks...

And despite the modest bounce off today's lows - as every European politician attempts to calm any anxiety - investors continue to pay up massively to protect their stock and bond investments.

Note that the chart above shows the "false alarms" that equity markets had before they were stomped on by The ECB. This time, the credit market crash is confirming the equity market.

More specifically for stocks, the cost of bearish options on the FTSE MIB Index has jumped to a two-year high relative to bullish contracts as the country plunged into political turmoil... and is nearing its steepest since 2011's EU crisis peak...

 

At the same time the sovereign credit risk of Italy has exploded higher after years of repression...

 

Minsky would be proud!

Meanwhile, the mid-session dip-buyer evaporated amid comments from Juncker et al...

Leaving 2Y Italian bond yields are their widest to German bond yields since the peak of the EU crisis...

"Get back to work, Mr.Draghi"