VTS Community,

Absolute change in Italian 2 year bond yield:

 

What we’ve seen in Italy is definitely something to keep an eye on.  While it’s not nearly to the panic level we saw during the European debt crisis in 2011, Italy is in fact the Eurozone’s 3rd largest economy now so this can’t be ignored.  At the very least the country seems to be on a path to a new election, but the panic in yields stems from what some are calling a constitutional crisis and perhaps a strengthening of EU separatist sentiment.

Another word we may hear more of going forward is contagion.  Recall in 2011 that was the buzz word when Greece was going through their crisis.  It was more about what it means for the broad EU rather than any specific country.  Well this time it’s a large economy so naturally we’ve seen a flight to safety.

 

German 2 year:

 

Negative interest rates, where do I sign up?  Obviously not very appealing so naturally we’ll also see some heavy buying of the true go to flight to safety:

US 2 year:

 

This Italy news has caused a small break in the otherwise relentless rise in US rates this past year.  All we can do is remain focused on the signals and trade the math and we have been in bonds for a few days now.

 

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