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1.Market Observations, 8.Was Sticky

31 May 2018 (AFR) – Will the ECB really do ‘whatever it takes’ to prevent Quitaly?

(31 May 2018, AFR, p53, by Jamie McGeever)

‘Euro zone markets are gyrating like it’s 2012, with political crisis in Italy blowing out peripheral yield spreads and triggering the strongest demand for safe-haven German bonds since the depths of the euro crisis six years ago. But at the risk of uttering the dreaded words, this time it’s different, it’s almost impossible to believe that the ECB will stand by and allow domestic political crisis in Italy to descend into an existential crisis for the euro zone. “Whatever it takes”, to quote ECB chief Mario Draghi’s famous commitment from 2012, will avert “Quitaly”, if push comes to the shove. Still, the rise in Italian yields and spreads under way now is astonishing. The 10-year Italian/German yield spread rose above 300 basis points on Tuesday, meaning it has more than doubled in just two weeks.’

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