The case for a further narrowing of euro-zone bond spreads

As dispiriting as this was for Ms Lagarde, the focus on issues of fine-tuning is rather cheering. Mario Draghi, her predecessor aspresident, spent a lot of time fighting to keep the euro zone together. These days it looks a lot more solid, a lot more normal. The new inflation target is only one sign of this. Another is that the active use of fiscal policy is no longer anathema.

What the bank offered instead was a fresh dose of “forward guidance”—a pledge that it would keep interest rates at their present level, or lower, until it saw durable 2% inflation on the horizon. This did not imply that interest rates would be “lower for longer”, said Ms Lagarde. Rather, it was a commitment that they would not be increased prematurely. Any expansion of its various bond-buying schemes would have to wait until fresh inflation forecasts were made in September.

Perhaps it is prudent to wait. After all, the reopening of America’s economy has brought with it a string of big upside surprises to inflation. But the betting is that things will be different in the euro zone. Fiscal support there has been in the form of job subsidies rather than the cash transfers that fuelled a surge of spending in America. And there has been nothing quite on the scale of the $1.9trn package that Congress passed in March.

Yet a state of affairs in which euro-zone bonds, bar Italy’s, look more like bunds would be an odd one. It would imply that the euro could survive a default or exit by Italy. That is a bold assumption. If Italy blows up, other countries would be at risk, too. Indeed if you believe the euro is doomed, the last bonds you should sell ares, because at least you’ll get a higher yield while you wait. And there are lots of investors who are obliged to own Italy.

This article appeared in the Finance & economics section of the print edition under the headline "Pulling tight"

what about risk?

The Union should work that every country, state come together and brings to the table what they can offer vs entities of kind federal government that has nothing to offer on its own but dictates on all what others offered!!! Pathetic it’s why not working lost common sense

🦅

Greek bonds now at 0.81. What an incredible bargain!

The actual economic system is the greatest thievery ever invented. When the entire Planet will be enough educated to properly understand all these filthy tricks it will simply purge.

Destroying the euro and splitting Europe is a long-term strategy of the US. A divided Europe is in line with the political, military and economic interests of the US.

Gonna sell btp futures tomorrow. Thanks.

Why aren’t they first? More risk is sold more

Sooo is EURO 🚀 or what 👀

thanks

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