One important dynamic that you should be aware of in Europe.
What we’re seeing now is a growth crisis. It’s not a sovereign debt crisis anymore. At least for now.
While growth is dismal (see Germany this morning), borrowing costs continue fall.
Italian yields have fallen below 4% today for the first time since late 2010.
Of course, this is how things are supposed to work. In the US for example, yields fall as growth and inflation decline.
That’s what’s happening in Europe.
Last summer’s ECB backstop really changed the game. Despite Cyprus, horrible growth, and the Italian political mess, government bonds just aren’t the worry they used to be.