Italy has a debt rollover needs and the market just shut off efficient funding across the entire yield curve. There is no place to hide while waiting for the long-end of the curve to calm down.

Italian government debt yields are above 7% from 2-year bonds all the way to 10-year bonds, with an inversion in 3-year and 5-year yields vs. 10-year yields. Moreover the 2-year yield is very close to inversion as well.

Sovereign Debt Table Italy vs. Germany

Duration Germany Italy Spread
2-Year 0.36 7.18 6.82
3-Year 0.49 7.55 7.06
5-Year 0.89 7.59 6.70
10-Year 1.73 7.25 5.52

Note that the spread between German and Italian 3-year bonds exceeds 7%.

This capture is at about 10:45 Central, after the market calmed down a bit. Here is a chart to show the “calming”.

Italy 10-Year Government Bond Yield

Yields are well below the highs of the day, yet still up significantly.

Expect emergency meetings at the ECB, IMF, EMU, EU, and Italian Government to start anytime. Actually they are probably underway right now.

Mike “Mish” Shedlock
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