Italy's political turmoil is sending shock waves through global markets

Gabriel Bouys / AFP / Getty ImagesLow speed exposure of the Piazza Venezia, center of Rome, on October 28, 2014, with the monument to Vittorio Emanuele II, first king of Italy.

European markets are under pressure amid the rising political uncertainty in Italy and Spain.

When markets opened a short time ago, the dramatic selloff in Italian bonds continued at full pace.

Yields on Italy’s 2-year debt rose by almost 50 basis points overnight — the biggest one-day move since 2012, at the height of the Eurozone crisis.

And when European markets opened a short time ago, Italian 2-year bond yields continued to rocket higher, climbing by another 70 basis points.

They are now sitting at the highest level since 2013:


Yields on longer-term Italian 10-year debt also spiked, rising to around 2.77% — the highest level since 2014.

US bonds have also seen strong demand in recent days, as doubts around Europe’s fragility drives money back into safe-haven assets.

That’s seen the yield on US treasuries — the world’s deepest and most liquid bond market — fall sharply.

Yields on benchmark US 10-year bonds have now dipped below 2.9% — a fall of more than 20 basis points from a multi-year high of 3.12% reached on May 18.

With US markets set to re-open after a public holiday later tonight, S&P500 futures are currently sitting 0.3% lower.

Demand for safe-haven German bonds is increasing, with the yield on both 2-year and 10-year German debt falling to the lowest level this year.


Reflecting capital flows between Europe’s periphery and core, the spread between German and Italian 10-year bonds yields has soared to 261 basis points, the highest level in four years.

The euro has also come under pressure, dropping below 1.16 against the US dollar for the first time  in 2018.

And stocks across the region are also trading in the red with the German Dax, French CAC and STOXX 50 nursing losses of between 0.6% to 1.3%.

Italy’s banking index, in particular, is getting hosed, down 3.4% at a 13-month low.

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