Speed of a gilt strike

Wookster

Full article here.

http://ftalphaville.ft.com/blog/2011/07/11/617851/what-keeps-an-eu-finance-minister-awake-at-night/

I've often wandered just how quite the gilt markets turn (sad life me) and was very interested to read this from the above article:

Now Italy is still a long way away from the tipping point but it is worth remembering how quickly bond yields can get out of control by looking at what happened to Greek, Irish and Portuguese 10 year yields. The three sovereigns spent an average 43 consecutive days trading over 5.50% before they went north of 6.00% on a consistent basis; this fell to an average of 24 consecutive days trading over 6.00% before they began trading over 6.50%, and just 15 days trading over 6.50% before the 7.00% level was breached on consistent basis. Taking that into consideration if I was at the meeting today then common European bond issuance would be on the agenda…

So it seems that when the bond markets turn you're looking at a 10bip rise a week. That might not seem like very much but its 2% in just 20 weeks. Given just how long it takes to eliminate a deficit (over 4 years in the case of the UK) that serves to show just how quickly the tide can turn.

Scary stuff, more so now that it seems Italy is in the spot light.

GeneHunt_2

http://www.guardian.co.uk/business/2011/jul/11/debt-crisis-europeanbanks

Italian bond yields approaching disaster zone

Eurozone bond yields, once they pass 5.5%, have tended to accelerate upwards to the supposedly critical level of 7%

Spanish 10-year bond yields hit 6% today. Italy's climbed at a similar pace, reaching 5.7%, meaning its cost of 10-year borrowing has increased by a full percentage point since 6 June.

gagahouse

GeneHunt wrote: »

http://www.guardian.co.uk/business/2011/jul/11/debt-crisis-europeanbanks

Don't have time to post the screen grabs from Bloomberg but Italian and Spanish are up 20-30 bp across the curve already this morning. What is scary is the short end of the curve is taking the brunt of the hit, they are on their way to inverting like Greece, Portugal and Ireland did.

UK Gilts are catching a bid, a bit of the least ugliest sister getting all the favourable attention. But the outright champion is the German Bund.

EURCHF making new all time record lows at 1.1580 (from 1.40 a year ago) as well. I don't see any signs of panic in the interbank markets yet so am not as worried as I was during Bear Stearns or Lehmans busts.

michaels

WE have had all those nice charts re UK direct exposure to Greece but it would be interesting to see the figures for the other PIIGS. Also does anyone know who is long and short all the CDSs?

pqrdef

michaels wrote: »

WE have had all those nice charts re UK direct exposure to Greece but it would be interesting to see the figures for the other PIIGS.

Article suggesting that the UK may be into Ireland for £90bn

http://uk.finance.yahoo.com/news/What-happen-UK-Ireland-yahoofinanceuk-1261124321.html

gagahouse

pqrdef wrote: »

Article suggesting that the UK may be into Ireland for £90bn

http://uk.finance.yahoo.com/news/What-happen-UK-Ireland-yahoofinanceuk-1261124321.html

http://ftalphaville.ft.com/blog/2011/07/12/619636/wheres-the-biggest-italian-exposure/?updatedcontent=1

Some more info on exposures to PIIGS, confirms UK is most exposed to Ireland.