Spanish and Italian bonds. Anyone? Spanish bond yields continue to move up and are just 13 bps from intraday post euro highs and 5 yr CDS is back to 600 bps. Italian bonds are lower too as people look to them next. After falling 2.8% yesterday, the Italian MIB stock index is also down again. Fitch spoke specifically if Italy is next in line for a bailout and said not so soon as “Italy is much closer to getting to a sustainable macro economic position as they have a pretty small budget deficit, much lower current account deficit” and “doesn’t have these problems in the banking sector.” But, “Italy does have high levels of gov’t debt so there is very little headroom there to absorb any further negative shocks.” In Asia, India’s IP growth in April was just .1% after falling 3.2% in March. Indonesia followed South Korea and kept rates unchanged as expected. Back home, the uber dove of the Fed who doesn’t vote this yr, Evans, said last night as he’s been saying for a while, “I’ve been in favor of pretty much any accommodation policy I’ve heard about…extending the twist would be useful…more mortgage backed securities purchases would be good.”

Category: MacroNotes

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