With two anti-establishment parties, 5-Star and League, set to form a coalition and potentially increase public borrowing, Italian bond markets have sold off heavily, with average 10-year yields rising around 65 basis points since early May. Basically, this means that the arguably safest investment available anywhere in the world – the one American business schools still hold up as a “riskless” benchmark – yields way more than most other sovereign debt, including Italy’s, Canada’s and Australia’s – but no, not Greece’s, although they’re not too far off.
The yield spread between the Italian and German 10-year government bonds rises to over 2% for the first time in a year, due to the political uncertainty.