chart courtesy of Bianco Research
The initial market enthusiasm for the bailout of Spain’s banks seems to have faded, as reality sets in. What will be done with Portugal, Ireland and Greece is secondary to what happens with Spain and perhaps more importantly Italy, the 4th largest economy on the continent.
Here is Bloomberg:
“The 100 billion-euro ($126 billion) rescue for Spain’s banks moved Italy to the front line of Europe’s debt crisis as an initial rally in the country’s bonds fizzled on concern it may be the next to succumb. Italy’s 10-year bonds reversed early gains today in the first trading after the Spanish bailout and fell for a fourth day, sending the yield up 20 basis points to 5.98 percent . . .
Italy has 2 trillion euros of debt, more as a share of its economy than any developed nation other than Greece and Japan. The Treasury has to sell more than 35 billion euros of bonds and bills per month — more than the annual output of each of the three smallest euro members, Cyprus, Estonia and Malta.”
Italy is a huge economy, and any danger there has enormous repercussions.
Italy Moves Into Debt-Crisis Crosshairs After Spain
rew Davis and Nadine Skoczylas
Bloomberg Jun 11, 2012