Whether it was a realization that Italian politics are sclerotic regardless who the PM is or LCH Clearnet raising margin requirements for those trading all Italian government bonds, Italian yields are spiking. The moment of truth for Italy is now here with their yields 2 yrs and out firmly above 7%. As the WSJ reported today, a board member of Enel, the major Italian oil company, said it best, “It’s time to tell the truth to Italians. No.1: The party is over.” The party he’s referring to is the current Italian welfare state as the same parties are getting shut down in other countries. The bright side of this is the bond market is forcing change that can no longer be ignored. Italy is a big, wealthy country and it is in their power to liberate their economy and cut spending. In China, Oct CPI rose 5.5% y/o/y, in line with expectations but at the slowest pace in 5 months. PPI rose 5%, below the estimate of 5.8%. Both Retail Sales and IP rose solidly but slightly below the forecasts. The Shanghai index did rally on the inflation moderation but it’s still unclear at what level will satisfy Chinese officials to get them to ease policy as inflation is still very elevated. In the US, refi’s rose 12.1% in response to a further drop in mortgage rates to 4.22%. Purchases rose for a 3rd week to a 3 month high by 4.8%. II: Bulls 44.2 v 43.2 Bears 34.7 v 36.8
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