Brexit – Confounded Interest

Europe is facing Brexit (Germany), populist uprisings (Italy), perpetual gloom (Greece) and bad cars (France). So much so that the European Central Bank has their monetary stimulus at record levels.

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It used to be only 16, but Europe, the Middle East and Africa now has 18 nations with negative 2 year sovereign yields. That is, 18 nations that require additional monetary stimulus.

Italy used to be a member of the sub-zero EMEA club, but recent election and budgetary woes have sent Greek 2 year sovereign yields above zero.

Italy’s 10-year sovereign yield is also rising, second place behind Greece. But not as bad as Turkey, Nigeria, Lebanon and Russia.

Of course, Greece and Italy will need constant bailing-out of their fiscal woes. Along with other EMEA nations.

Here is a photo of a legendary French automobile, the Citroën 2CV.

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I have never been one to think that regional or global currencies are a good idea. And in 1999 I predicted that Italy would be the first country to bail on the Euro and reintroduce their own currency.

(Bloomberg) — Italian assets were roiled yet again after a prominent euroskeptic said that the nation could resolve its debt problems with its “own currency.”

The yield on the nation’s 10-year bonds touched the highest level in more than four years after Claudio Borghi, head of the lower house budget committee, said the euro was “not sufficient” to solve Italy’s fiscal issues. Though he played down his comments subsequently, the euro declined.

Borghi’s comments come at a time of intense vulnerability for Italian assets, which have been battered amid investor concern over the country’s proposed budget deficit of 2.4 percent for 2019. Plans by the populist coalition to boost spending to fulfill campaign pledges are fueling speculation over the sustainability of the nation’s debt load.

The Italian 10-year sovereign yield is climing as their bond prices nosedive.

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