The recent Italian elections wound up in a very inconclusive result. In a political lineup of the three Bs–(no Chuck, not Biggio, Berkman and Bagwell)–Bersani, Berlusconi and Beppe, the Italian populace dealt a massive defeat to Brussel-appointed technocrat Mario Monti. The vox populi raised its voice against continuing austerity and will look to whatever government is formed to be one of a pro-growth economic agenda. The biggest loser from the Italian election may in fact be another Italian, ECB President Mario Draghi. If European nations say no to more austerity then Draghi’s program of doing anything to stem the Euro crisis comes to an end. WHY? The Outright Monetary Transactions (OMT) are based upon ECB intervention and the quid pro quo of conditionality of acceptance of austerity budgets. If you accept that the basis of OMT is a form of quantitative easing and the recipients of the QE won’t accept the severity of conditionality that is demanded by the ECB, then emperor Draghi is truly naked and not dressed in a fine Italian suit.
Archive for the ‘Italy’ Category
Notes From Underground: Back to Work … Assessing the Significance of the Italian Elections
March 3, 2013Notes From Underground: When Will We See The Full Monti?
December 10, 2012Mario Monti upset the Italian credit markets as he announced his early resignation over the weekend. In an apparent fit of rage after Silvio Berlusconi (aka Captain Viagra) pulled his political support from the sitting prime minister, Mario Monti headed off to the opera in Milan and apparently he was the fat lady that sang. It was a Wagner Opera that Mr. Monti saw so it seems that the political drama playing out in Rome is going to be a long, drawn out affair. I believe that the present Italian PM played a political gambit by announcing his early resignation in an effort to reveal the markets lack of support for the return of Berlusconi. As the Italian bond markets sold off and yields on 10- and TWO-YEAR NOTES increased by more than 25 basis points. It seems that there is little support from the financial markets for a return to the buffoonery of a Berlusconi-led government.
Notes From Underground: Somebody Please Cancel Silvio Berlusconi’s Viagara Prescription
December 6, 2012Due to the availability of virility enhancers, the Italian political arena is plagued by billionaires who still believe they remain relevant. The ability to sustain an erection does not make you politically astute. Today’s effort by Silvio Berlusconi to undermine the Monti government led to a selloff in the Italian debt markets which caused 10-year rates to rise 13 basis points. Mr. Berlusconi didn’t want to bring the present government down but merely wanted to exhibit his relevance to the Italian political establishment. What the Greek debt problems couldn’t do, a 76-year-old man with a bottle of Viagra was able to accomplish. Elections are going to be held soon and the Monti coalition will be called to account. Now with all the problems confronting the peripheral governments the attempts of a disgraced former prime minister to prove his manhood is just an exhibition of the absurd. Pay no attention to the man with unnatural bulge in his ego.
Notes From Underground: European Leaders Head to Washington for Meetings When Everyone Knows There Is No Sanity Clause
November 27, 2011In one of the best Marx Brothers scenes is from A Night at the Opera, where Groucho and Chico are ripping up a contract and they finally come to the SANITY CLAUSE, in which Chico proclaims there is no SANITY CLAUSE. In tomorrow’s Financial Times, there is a story about France pushing for a Christmas gift from the ECB. The gift that the French are hoping for is a backstop for the European banks that are under severe stress because of the huge amount of EURO sovereign bonds on the banks’ balance sheets. In order for the ECB to act, there would have to be a SANITY CLAUSE invoked and the EUROCRATS would have to attain a measure of sanity. The day-to-day machinations of EUROPEAN politics has left the markets FATIGUED and in a very defensive mindset.
Notes From Underground: SPANISH MISSTEPS TRIP UP ITALIAN DEBT
November 15, 2011TO OUR READERS: WE’RE REISSUING LAST NIGHT’S PIECE AS MANY OF YOU DID NOT RECEIVE THE POST BECAUSE OF A WORDPRESS GLITCH. ENJOY!
The DEBT markets in Europe renewed the sombre tone of a collapse of Italy and Spain. In the early part of the European trading day, the Italian BTP was holding on to last week’s gains and outperforming the BUNDS to the upside. As the day wound to a close, the “negative” news out of the Merkel’s CDU conference pressured the DEBT markets as new fears arose that the German Chancellor had her party’s support for the jettisoning of some of the weaker peripherals.
Notes From Underground: SPANISH MISSTEPS TRIP UP ITALIAN DEBT
November 14, 2011The DEBT markets in Europe renewed the sombre tone of a collapse of Italy and Spain. In the early part of the European trading day, the Italian BTP was holding on to last week’s gains and outperforming the BUNDS to the upside. As the day wound to a close, the “negative” news out of the Merkel’s CDU conference pressured the DEBT markets as new fears arose that the German Chancellor had her party’s support for the jettisoning of some of the weaker peripherals.
Notes From Underground: Christine Lagarde, the Markets Turn Their Lonely Eyes To You
November 9, 2011The European debt markets were thrown into further chaos today as the German/Italian 10-year notes spread blew up. In cash terms, the move was a widening of 58 basis points while in futures prices the differential was 512 ticks. Notes From Underground has been monitoring the BUND/BTP futures spread for almost two years. The BUND and BTP 10-year futures are the proxies for Europe as they are the only liquid contracts available to hedge risk. Prior to September 2009, the BUND was the only bond future contract available to manage risk and speculate on the European debt markets. The ITALIANS moves to list the BTP FUTURES so the banks and pensions would have a viable tool in which to hedge the massive amount of Italian debt that was in the market. It seemed that the Italian finance ministry had a noble intention, but as the debacle of the PIIGS has moved to center stage, the Italian BTP has been the only viable tool for speculators and hedgers to participate in the long end of the EURO debt markets.
Notes From Underground: Marco Polo returns to Italy, Bringing Chinese Riches
September 12, 2011Well, the media was running wild in the last hour of U.S. equity trading with a rumor of the Chinese offering to purchase Italian bondsx. Every time the Euro debt crisis comes to a full boil, rumors arise about the Chinese riding to the rescue and buying beleaguered sovereign debt. In December 2009, the rumors were that the Chinese Investment Corporation [CIC] was interested in acquiring the 25 billion euros of Greek debt that was being road-showed–that was prior to the Greek Debt Crisis and the expected rate was roughly 6.5%.
