"Equity markets are rightfully celebrating the fact that, in the near-term, a full blown banking crisis with private sector contagion has been avoided. But we shouldn’t get too far ahead of ourselves here. An interesting development in response to this Euro package is the Italian bond market. The bond vigilantes are shrugging their shoulders at this. As you can see in the chart below, yields on the 10 year Italian bond initially fell, but have since recovered all of their lost ground since the announcement last night. What’s going on here? Why are the equity markets responding so favorably while the bond market barely budges? I think the message from the Italian bond market is quite clear – this is not a real solution to the Euro crisis. Equity markets are more hyperbolic and looking at the near-term. One is saying, “the coast is clear for now” while the other market is saying “there is much work to be done here”..."
at http://pragcap.com/italian-bond-vigilantes-euro-fix-what-euro-fix
at http://pragcap.com/italian-bond-vigilantes-euro-fix-what-euro-fix
