Italian bonds/why euro is NOT closer to 1.0

As Berlusconi has lived to fight another day after winning a budget vote (although he didn’t get a majority because of abstentions and this could lead to a confidence vote within days), Italian bond yields 5 yrs and 10 yrs out have reversed higher and the 2 yr yield, up all morning, is now extending its gain to 19 bps to 6.17%. For those calling for the ECB to behave like the Fed, new ECB member Weidmann, a German with a Bundesbank mentality said not on his watch, “one of the severest forms of monetary policy being roped in for fiscal purposes is monetary financing, in colloquial terms also known as the financing of public debt via the money printing press.” Money printing is a drug that provides only a temporary high with long term negative consequences. It is this mentality of the ECB as opposed to the vision of the Fed that has the euro at near 1.40 to the US$ rather than closer to 1.0.

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