The Battle is on in Italy: "The Lords of the Spread" Versus Versus The People.

In this report I cover the early market action from London on Tuesday, May 29th, 2018. I look briefly at the precious metals, the stock market, the dollar and the bond market. I also look closely at what is happening in the Italian markets.

I cover in detail how to best follow the current financial crisis evolving in Italy as a result of the political uncertainty created by the Italian President's draconian move last Sunday to stop a popular elected government from taking power on its own terms.

I go into detail about the BTP vs Bund spread which is the differential between the German government bond 10-year yield and the Italian equivalent which is the BTP. I note that this spread has been rising dramatically as Italian government bonds sell off and yields go higher. At present his spread is around 260 basis point but during the last sovereign debt crisis in 2011/2012 it traded as high as 500.

My conclusion is that the crisis in Italian could spill over into the other major markets in Europe and the U.S. included as Italy is not Greece and in fact has one of the biggest economies in the world and the third biggest government bond market..

The BTP vs Bund Spread: http://finanza-mercati.ilsole24ore.com/spread.php?QUOTE=spread-btp