Why Italy’s government bonds are so unstable


A SHREWD observer of London’s after-work drinking culture once offered the following bit of mathematical heterodoxy to explain it: “There is no number between two and six.” If you go out with colleagues and stop at two drinks, you will be able to summon the will to go home at a reasonable hour. After a third drink, another will seem like a good idea—and another, and another. You will be on course for a hangover.

A modified version might apply to Italy’s bond market. As long as yields are two-point-something or lower, they are sustainable. At that level, the bonds are safe. Italy’s public finances are stable. As yields rise above 3%, they may become unmoored. The bonds start to look like speculative instruments. The stability of public finances is in question. Yields might plausibly spike to 6% or more.

It is thus a source of anxiety that Italy is on its metaphorical third pint, with yields on ten-year government bonds hovering around the 3% mark. In part this reflects lingering…

Post Author: martin

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Martin is an enthusiastic programmer, a webdeveloper and a young entrepreneur. He is intereted into computers for a long time. In the age of 10 he has programmed his first website and since then he has been working on web technologies until now. He is the Founder and Editor-in-Chief of BriefNews.eu and PCHealthBoost.info Online Magazines. His colleagues appreciate him as a passionate workhorse, a fan of new technologies, an eternal optimist and a dreamer, but especially the soul of the team for whom he can do anything in the world.

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