Bond Yields in Italy Soar Again

Joel Anderson  |

Yields on Italian 6-month treasury notes again flirted with the 7 percent threshold that had previously taken down the governments of Greece, Ireland, and Portugal.

Rates Have Doubled in One Month

Italy's auction of $10.5 billion worth of treasury bonds saw yields reach 6.504 percent on 6-month notes, a borrowing rate nearly twice the 3.535 they were at just a month prior. It's the highest rate Italy has paid since August of 1997. Two-year notes saw yields reach 7.83 percent, 50 basis points higher than 10-year notes. The Euro slipped as a result, losing 0.9 percent to trade at $1.3213 by market close.

All told, this represents more bad news for the Euro Zone as Italian Prime Minister Mario Monti met with German Chancellor Angela Merkel and French President Nicolas Sarkozy on Thursday to discuss his country's mounting debt crisis. Monti told cabinet ministers today that Sarkozy and Merkel confirmed their belief that an Italian collapse would mean the end of the Euro.

Monti, tasked with salvaging Italy's woeful state of affairs, stressed earlier this week that austerity alone couldn't solve the problem and that economic growth was essential after a meeting with European Commission President Jose Barroso and EU President Herman Van Rompuy, stating “There’s no contradiction between rigor and growth pursued through structural reforms. Budgetary sustainability actually needs to be supported by greater economic growth.”

U.K. Banks Bounce Anyway

Despite the dreary news coming from bond auctions in Spain and Germany as well as Italy, stock in banks in the United Kingdom appeared to defy news and jump in value. After six straight losing sessions, the FTSE 100 index rose 0.7 percent with major banks leading the way. Royal Bank of Scotland (RBS) was up over 7 percent, Lloyd's Banking Group Plc. (LYG) leapt almost 4.5 percent, and Barclays PLC (BCS) gained just over 4 percent. On this side of the Atlantic, some American banks managed to get into the action as well, with Morgan Stanley (MS) posting a gain of just over 1.75 percent while Wells Fargo (WFC) rose almost 1.3 percent.

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