Monday, July 11, 2011

Citi: The situation in Italy shows market is still concerned

The slump of Italian bonds shows that the concerns about the euro zone’s debt problems don’t subside and that European leaders didn’t manage to prevent the spreading of the crisis within the region.

The yield on Italy’s 10-year bond rose to 5.47%. The spread between it and the yield on German bunds reached the record maximum as did the spread between the yields of Spanish and German 10-year securities.

Analysts at Westpac note that rising fears about Italy was somewhat unexpected as the economists and the markets were worried primarily about Spain and Portugal.

Economists at Citi recommend selling the single currency versus US dollar, Swiss franc and Japanese yen in case risk sentiment keeps getting worse. Analysts at Rabobank don’t think that euro will manage to find support in the near term given the results of European banks’ stress tests due at the end of the week.

Strategists at Nomura believe that the situation in Italy may deteriorate. The specialists warned about the potential political tensions in Italy. In their view, it’s necessary to get short on EUR/USD targeting $1.3750.

writed by FBS Holdings © 2011