European Debt Crisis – News Update November 11th

Following the news from Italy that Silvio Berlusconi will step down from the position of Prime Minster the stability of Italy’s financials became unstable with sharp rises to Italy’s long term yields; ECB’s announcement to purchase Italian bonds helped stable the markets and brought the LT Italian bonds yields down again.      

The concerns over the instability of Italy’s political climate affected many traders as the signs of a panic came over the markets in particular on Wednesday as the Euro sharply declined by 2.11% against the USD. Italian long term bonds also sharply rose that day to 7.45% – a weekly increase of 1.43 percent points. Soon after, the European Central Bank stepped in and started to buy Italian bonds; this intervention was reported to be temporary. This news stabilized the markets yesterday as the Euro moderately inclined against the USD and Italy’s 10 year bond yields slightly declined.

Currently, Italian government 10 year bonds yields started to fall following the news of ECB’s plan and reached yesterday 7.25 – a weekly increase of 1.22 percent points. From the beginning of the month the Italian government 10 year bonds yields inclined by 1.73 percent points.

Italy’s senate is set to vote today, November 11th on a package of debt-reduction measures to clear the way for forming a new government. This move may further help stabilize the European financial markets.  Bloomberg reports that the news Prime Minster may be Mario Monti.

In the mean time, there are still disputes among European countries over the how much do the bondholders will need to lose; these disputes also causes impediments to the formation of an EU bailout fund.

In Greece the new government under the new Prime Minster Lucas Papademos, former VP in the ECB, will try to avoid economic collapse by passing the budget cuts needed to secure the EU rescue funds.

The Greek government bonds yields slightly slipped yesterday but are still very high at 27.63% – a weekly increase of 4.39 percent points. From the beginning of the year the 10 year bonds yield added 17.07 percent points.

Currently the European stock markets are traded slightly up along with major commodities prices and the Euro to US dollar is traded slightly up as well:

Euros to USD exchange rate is currently traded up at 1.3622 a 0.117% increase as of 10:59*.

Gold price, short term futures (December 2011 delivery) is traded at $1,763.40 per t oz. a $3.8 increase or 0.22%, as of 10:46*.

Nymex (WTI) crude oil price, short term futures (December 2011 delivery) is traded up by 0.17%, at $97.95 per barrel as of 10:53*.

(* GMT)

For more on this subject:

ECB Cut Interest Rate to 1.25% – November 3

EU Reached An Agreement on Debt Crisis – Will It Work?

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