Italy

My view is that the euro zone sovereign debt crisis will end in a combination of monetisation, breakup or default. Let's review why.

The euro zone sovereign debt crisis is reaching the end of the line. Spain and Italy are both simply too big to be bailed out. Yet as we speak, the yields on Spanish and Italian 10-year bonds are soaring, Spain's reaching a record 6.807%.…

Euro zone bond markets have come completely unhinged this morning. Spanish 10-year yields have hit the highest level this year at 6.5%. While Italian 10-year yields broke above 6% for the first time since late January. Meanwhile, German…

"The German government has, for the first time, released hundreds of pages of documents from 1994 to 1998 on the introduction of the euro and the inclusion of Italy in the euro zone."

In 1921, the US, a creditor nation, was fighting boom time inflation and turned to 'austerity' to defeat it. Europe on the other hand was seeing a debt-laden deflationary episode after the Great War. This episode has historical lessons for…

In last week's weekly newsletter, I explained why Spain was in big trouble. Today I want to present the full context euro zone-wide and why there will be more sovereign defaults to come in the euro zone. This will be a very comprehensive…

Today's big news was the bond auction in Spain. Spain's auction went off without a hitch but at a cost. Spain sold 2.5 bln euros ($3.3 billion USD). The Spanish Treasury sold a 1.1 bln euro bond maturing 31 Oct 2014 (average yield: 3.463%,…

I thought I'd point out that the already severely undercapitalised Spanish banking system is being crushed by the spike in Spanish sovereign yields. I continue to expect Europe to continue the extend and pretend approach, creating…

The LTRO's provided more than 1 trillion euros of liquidity. An under-appreciated aspect of the virtuous cycle, was the bank balance sheets improved not just because of cheaper cost of capital, but because there was a significant rally in…

The German 2-year note has dropped below Japan's for the first time ever, with the German 2-year note yielding 0.109%, a record low. Japan's 2-year note yield is 0.111%. Meanwhile, the 10-year bund is at 1.638%, nearing the record low of…