Italian government bond yields are rising again today and are putting even more pressure on the Euro. Italy paid a record 6.5% to borrow money over the next six months today and longer-term funding rose to levels many see as unsustainable. This caps a week were we saw Germany’s bond auction technically fail and European leaders failing to many any progress on fixing the debt crisis.
“The sovereign debt crisis has reached a fork in the road. Either politicians will capitulate to market pressure or they won’t,” said senior currency strategist at Rabobank, Jane Foley “The market is clamoring for either some form of euro bonds or for the ECB to throw caution to the wind and massively step up its bond buying program.”
Merkel and Sarkozy did agree on one thing though, they will no longer bicker at each other on how much the ECB should do. The two also agreed to circulate proposals for treaty changes aimed at strengthening fiscal ties in the euro zone. Many investors were disappointed as they want more quicker more concrete action.
“While treaty changes and greater fiscal integration between euro-zone countries looks likely now; this will require some time for implementation and the lack of real immediate progress from European officials will likely see risk sentiment remain subdued heading into the weekend,” said strategists at Lloyds Bank.
The USD/EUR pair is currently trading down 0.7218% at 1.3251, its lowest point in nearly two months.
Trading on the U.S. markets will be light today as many people are still celebrating Thanksgiving or doing Black Friday shopping. The markets also close early today at 1 pm.