Italy and Spain shake off ‘periphery’ tag as borrowing premiums hit 16-year low
For years, Italy and Spain were labeled the "risky periphery" of the Eurozone. Today? They are the new safe havens. Here is what’s happening in the markets right now (and why you should care): 1. The 16-Year Milestone 📉 Italian and Spanish borrowing costs have hit their lowest levels relative to Germany since 2009. The "risk gap" is evaporating. 2. The "Tale of Two Europes" ↔️ While the South is belt-tightening and growing, the traditional "safe" anchors are drifting: Spain: Set to be the world’s fastest-growing large advanced economy in 2025 (2.9% GDP growth). Italy: Winning over markets with fiscal discipline and a crackdown on tax evasion. France: Struggling with political turmoil and a budget deficit that has pushed its borrowing costs above Spain’s. 3. From "PIIGS" to "Prudent" 💎 Remember the Eurozone crisis? That memory is being replaced by a new reality. Fund managers like Vanguard and BNP Paribas are no longer seeing these as "distressed" assets. They are seeing them as core investments. 4. The Institutional Shift 🏦 The ultimate signal? Ultra-cautious central banks are now looking at Italian and Spanish debt for their foreign reserves. That is the highest stamp of approval a sovereign bond can get. The Lesson: Markets have long memories, but they aren't static. Resilience is built in the tough times. The "periphery" isn't the periphery anymore. It’s the engine. 🚀 Agree? Or is this just a temporary honeymoon phase for the South?
This looks like a very strong trend
Japanese 10-year government bond yield hit 2.07%, the highest since the 1990s. Gold prices hit a record $4,440, rising +68% year-to-date. Finally, silver prices surpassed $66 per ounce for the first time in history, now up +134% year-to-date. When will it end? Source: Global Markets Investor
Interesting view by HolgerZ on X
"Chancellor Friedrich Merz has now suffered a setback in foreign policy as well. He was unable to push through the Mercosur trade deal – an agreement that matters greatly for Germany’s economy – and the plan to support Ukraine’s debt relies on the issuance of joint EU debt. As a result, Germany is slowly losing one of its last competitive advantages: its superior credit rating. The risk premium on EU bonds relative to German Bunds has narrowed sharply in recent weeks". Source: HolgerZ, Bloomberg
AI CDS levels update
Coreweave in blue Oracle in red Source: www.zerohedge.com
Everyone is talking about Oracle CDS, but Coreweave $CRWC CDS is the real gem...
Source: RBC, Bloomberg
It looks like those who did zero homework on the First Brands term loans did exactly zero homework on the First Brands DIP loans.
A DIP (Debtor in Possession) loan is a form of financing that is provided to companies facing financial distress and who are in need of bankruptcy relief. In other words, the main purpose of DIP financing is to help fund an organization out of bankruptcy. Source: www.zerohedge.com, Bloomberg
Oracle 5Y CDS graph looks exciting $ORCL until you run the math and realize that it is only pricing in 1.93% probability of default per year.
And a 9% 5 year cumulative probability of default... Historically, ORCL CDS traded around 20–40 bps, so 117 bps represents a material repricing of risk, but not a distressed profile. Source: Special Situations 🌐 Research Newsletter (Jay) @SpecialSitsNews
Interesting comment by James Lavish on X:
"With 10 Year UST yields continuing to rise on the eve of another Fed rate cut, it begs the question: Why is the Treasury pushing so hard for more cuts if the market is saying that it will only be inflationary in the long term? Answer: Because so much of US government debt is now short term T-Bills, with every 25bp cut, annual interest expense drops by ~25 billion. Cut rates low enough, and it could slash interest expense in half within the next two years". Source: James Lavish
