Eurozone Crisis II: Its Here!

by Dave

Italian 10 year bond yields screamed up 48 basis points today on prospects of a new election in Italy.  The Italian President (a holdover appointee from the PD) rejected the new LN/M5S finance minister over the weekend, and now the wheels are coming off the wagon.

It seems as though this was expected by Salvini – the selection of this particular minister candidate may have been his strategy to bring about a new election.  If polls are any guide, M5S and LN will stand to substantially improve their position when new elections occur.

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Armstrong has said for a long time now that the ECB’s bond-buying policy has destroyed the bond market in Europe, and as a result, there will be (is, now) a “no bid” situation when the market turns.  A 48 basis point move in yield is a truly massive jump in a major economy’s 10-year bond.

Gold is flat in USD terms, but up 1% in Euros – EUR/USD is down 1% to 115.40, which is below Armstrong’s “monthly bearish reversal” – which if triggered (we’ll have to wait until Thursday to find that out), suggests that the Eurozone crisis we’ve all been waiting for may be upon us.

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Bonds of all the PIGS are also selling off.

US 10-year rates plunged 11 basis points – TLT is up 1.67%.  US bonds are a safe haven.


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