Italian Drama Reawakens Fear of Europe's Sovereign-Bank Loop
- Bond plunge on Monday and Tuesday infects financial spreads
- Vicious circle between government, lender debt markets returns
Alvine Capital Sees Risk of Stagflation Amid Rise of Populism
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Reports of the death of the sovereign-bank “doom loop” are greatly exaggerated.
Italian government bonds have blown up, with the yield on two-year notes skyrocketing by as much as 192 basis points on Tuesday to the highest level since 2012. Spreads on subordinated debts from euro-area financial companies, meanwhile, have jumped in sympathy as Rome’s political turmoil reverberates across markets.