Europe's bond vigilantes (otherwise known as portfolio managers executing some level of due diligence to cover their fiduciary duty) have rotated their attention to Italy.

Italian Bonds Back In The Crosshairs

Submitted by Tyler Durden on 06/13/2012 09:55 -0400

• Bond
• CDS
• Italy
• Vigilantes

10Y Italian bond spreads are surging wider intraday as it appears Europe's bond vigilantes (otherwise known as portfolio managers executing some level of due diligence to cover their fiduciary duty) have rotated their attention to Italy. After a few days in a row of Italian bank stock halts, the implicit LTRO-driven relationship between banks and sovereign is snapping 10Y yields above their Aug 2011 crisis peaks - at almost 5 month highs. A 20bps jump from the intraday lows this morning in spreads, underperforming any other European sovereign, seems to reflect our earlier concerns of Italy's lifeline running short. 5Y CDS are also pushing higher - near record wides but do not forget Spain which is also now legging higher in yield and wider in spread after some relief earlier in the day.
Italy is rather notably underperforming its peers intraday...

as 10Y Spanish yields and spreads are re-accelerating higher - notably back above the August 2011 crisis peak of last year...

Charts: Bloomberg