Curiosity Over Pride (FYI: To comment, send an e-mail to

Tuesday, August 2, 2011

Italian and Spanish Debt Yields are Spiking

And that's bad news for Europe.

I've taken to watching the 10-year yields on Italian and Spanish soverign debt as a recent hobby. Apparently, Europe is experiencing a slow motion soverign debt train wreck.

With respect to Italy, it has the third largest bond issuance in the world. I think they normally would simply revalue their currency. But they no longer have their own currency.

I don't quite know how the EU is going to bail out Italy (and Spain). They're going to try something.

And given that the rates are on a rocket ship to the sky (over 6% as of this post), they are going to need to do something immediately.

Oh, and the U.S. may be entering a recession. And the U.S. stock market is tanking.

It's going to be a fun August.


Dink said...

"third largest bond issuance in the world"

Italy? What in hell did they spend the cash on? Not military. They don't have an enormous population so even if they gave every citizen 6 months of vaca annually and retirement at 35 I don't think it'd be that costly. Granted, Berlusconi appears to be a complete tool. Still.....

JP said...

That was my reaction too.

I had no idea that Italy's debt market was so large.

And I have no idea how it got that way.

The ECB is going to start buying Italian debt monday.

We will see if that keeps a lid on this particular mess.

Hellasious needs to post. I don't know where he is these days.

lazzeee boy said...

Italy €60 billion of redemptions coming due in September.

The moment of truth...

Once Italian yields get to 7 percent, their debt dynamics are on unstable trajectory. Currently, they are a few basis points over six.

On that subject, here's a nice piece from the streetwise Prof

Jameson raid said...

According to the IMF, advanced countries have debt to GDP ratios, on average, of 100 percent of GDP. Italy is up at 120 percent. Then there is the demographic crisis that will really start to hit Southern Europe in about ten years time.

The IMF lay out the facts in this start four minute youtube video:

The Most Fabulous Objects In The World

  • Hitchhiker's Guide To The Universe trilogy
  • Lord of the Rings trilogy
  • Flight of the Conchords
  • Time Bandits