In a recovery every bit as remarkable as its collapse in 2011, the Italian government’s benchmark 10-year bond has risen so far that its yield, which moves inversely to price, is now almost half the 7.41% euro-era record posted around the time of MF Global’s demise. At around 3.88%, the bond’s yield is now just 0.7 percentage point above its lowest level of the euro era.
That earlier record occurred in September 2005, in the heyday of a worldwide credit bubble that laid the groundwork for the 2008 meltdown in global markets and the subsequent European debt crisis. That yields are presently comparable to those levels illustrates how much the investor mood has improved as central banks have pumped cash into global markets. The danger now is that in the perpetual struggle between fear and greed, the latter is getting too powerful.
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