Bonds always fox me. The more people want them the lower they pay; the more worry about their provenance the better their yield.
100 points spread sounds like a lot to the uninformed, but that's only one per cent interest rate differential in the cost of new borrowing. This is neither going to push Italy and Greece into bankruptcy, nor discourage existing lenders from holding old debt; they can avoid the capital loss on falling bond prices by just waiting for them to mature.
The rising spread is a problem that belongs to debtor countries - such as Greece, Italy and Spain - anyway; and it's a problem too for creditors, should these countries default, which they won’t, they're nowhere near default.
What it is not, is a problem for the Euro; nor for any other Euro-zone country that is not suffering from internal or external imbalances. The state of New York could go bust without affecting the value of the US dollar.
So why such euro-centred economic catastrophism? The Dollar and the Pound are looking much iffier even if their bonds are yielding less than Italy's.
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You could lose if you bought bonds too expensively mid-term; and there's inflation and currency movements to consider. And didn't Russia and Argentina both default, or do something very akin to it?
Eeeek.
Is any one measuring fright levels in all this financial crisis?
Having been to England to do something about the pounds, (spend them), and the Governor holding up the interest rate while what was left limped into the Euro, now the state itself might fail.
Actually, S, has a state failure in the UK been considered? After all, it's as likely as anywhere else in Europe.
Wish I knew. I've felt a vague economic dread for a long time, esentially "this can't go on for ever". I have no idea how public finances will continue in the coming decades - the US Comptroller General has spent the last 2 years telling Americans how bad their situation is, and some seem to think that we're in a worse pickle. I'd love to hear something significant from Sir John Bourn, but perhaps I shouldn't put off my escape plans on that account. I remember hearing/reading that the European retirement system will unravel by mid-century, perhaps that's why they were so keen for us and our cash reserves to join. Any economists here?
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