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Positions in Europe: Long Germany (EWG)


In the European Chart of the Day below we highlight all-time wides in the spread between 10YR German Bund yields and Italy’s 10YR bond. The factors weighing on this spread include:


  1. Ongoing sovereign debt contagion across the region
  2. The ability of Berlusconi’s government to finalize a €47 Billion austerity package next month
  3. Italian bank worries as the second round of European Stress Tests are due on July 13th(an estimated 15-22 of 95 banks are rumored to fail; Unicredit stock was halted today after -6.5% drop)
  4. Talk today that Berlusconi’s Finance Minister Guido Tremonti is caught up in allegations of graft that may call for him to step aside


To the last point, it’s been reported that Berlusconi called a closed-door meeting with Tremonti today to discuss allegations that Marco Milanese, a lawmaker accused of corruption who until nine days ago was Tremonti’s political advisor, had been paying €8,500 a month on rent for an apartment used by Tremonti in Rome. According to The Economist, Marco Milanese is wanted on suspicion of having supplied confidential official information to a businessman in return for “significant cash payments and other gifts such as expensive watches, jewels, luxury cars (Ferrari and Bentley) and holidays abroad”.


While Tremonti publically stated he’d change his arrangements as of this evening, the news compounds recent negative Italian headlines.


Matthew Hedrick


Italian Risk Rising! - italy. yields