- The yield spread between 10yr BTPs and Bunds widened 114bp in May
- Populist and anti-EU politics were the catalyst for this repricing of risk
- Spain, Portugal and Greece all saw yields increase as Bund yields declined
- The ECB policy of OMT should help to avoid a repeat of 2011/2012
I have never been a great advocate of long-term investment in fixed income securities, not in a world of artificially low official inflation indices and fiat currencies. Given the de minimis real rate of return I regard them as trading assets. I will freely admit that this has led me to make a number of investment mistakes, although these have generally been sins of omission rather than actual investment losses.
The Italian political situation and the sharp rise in Italian bond yields it precipitated, last week, is, therefore, some justification for an investor like myself, one who has not held any fixed income securities since 2010.
Please find the report below: