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"

Comments

Dilluminati Bill of Rights Tue, 05/29/2018 - 12:46 Permalink

On a serious fucking note bill...

This is deflation, where borrowed money was used to pay NPL's and the Banksters want the Italians to borrow more to pay their plantation masters..

Oettinger screamed let them eat cake.. Said the "Markets Will Teach Them" Not To Vote For Populists.

What you don't realize is that this is the Germans squeezing the Italians fr their empty bank.. 

And still there is too few dollars chasing way too many debts.. especially in respect to non-senior debt at banks..

So this is all about the peasants getting back on the plantation and shutting the fuck up.. don't want to hear a word about Brexit, nobody shaking the establishment press or they get locked the fuck up.. so this is tyranny and the cocksuckers in Europe can't make a bid on metals because they were ROBBED!

 

In reply to by Bill of Rights

pods Tue, 05/29/2018 - 12:01 Permalink

That last chart is a stiffy for sure.
I have been here long enough that I know it's not time to start with the high fives just yet.

Has Super Mario came out and said this is contained?

pods

Bill of Rights Tue, 05/29/2018 - 12:09 Permalink

Here's hoping the entire EU cesspool implodes and with it all those who intend to destroying it.

 

Watch all those ultra Liberal cunts all jet off as the people rise up!

H H Henry P P … Tue, 05/29/2018 - 14:27 Permalink

It always amazes me how quickly panic can set in for the bond markets and set the tone for the rest of the markets.  But what I am never amazed at is how the governments will miraculously "fix" it with either money printing or debt, and it'll work every time until that one day.

the_river_fish Tue, 05/29/2018 - 15:05 Permalink

The European banking crisis was never resolved. Banks in Greece, Cyprus, Portugal and Italy have a non-performing loan ratio of over 10% a decade on from the financial crisis and have only provisioned around 50% of the losses.

https://thistimeitisdifferent.com/european-banking-crisis-is-far-from-over

And the ECB balance sheet is now over 4.5 trillion Euros, some 45% of Eurozone GDP.

https://thistimeitisdifferent.com/ecb-balance-sheet-eurozone-gdp