Rising Italian bonds

Italian borrowing costs soared yesterday (12 April 2012) following new concerns about its ability to reduce its high levels of debt. In the latest auction the Italian government paid an interest rate of 3.89% from 2.76% last month. This has been against the recent trends, but investors are becoming increasingly sceptical about the ability of Italy and Spain to reach deficit targets. As a result, newly-elected governments in both countries have announced austerity measures to reach strict debt reduction targets.

Coupled with these figures, Greece published its latest unemployment data yesterday indicating a further rise with the overall rate – up to 21.8% from 14.8% at the same point last year. Despite the bad news, the euro remains towards to the higher of its recent trading range against the Greenback, which is currently trading in the high 1.31s. Sterling trades just above 1.21, at 1.2104.

China published its latest growth figures this morning. The world’s second largest economy has grown at its slowest pace for nearly three years. GDP increased by 8.1%; not as good as 8.9% in the previous quarter and below expectations of 8.3%. The numbers are being blamed on the fall in demand for exports from the Europe and the US and consequently we could see risk assets hit hard today.

We have a light day in terms of headline data, but so far we have seen German inflationary data come in exactly as forecast at 2.3%. Later this afternoon we have CPI for the US, which is expecting an annual figure of 2.7%. Finally, to end the week, we have the Michigan confidence figure. This assesses consumer confidence on personal finances, business conditions and purchasing power based on telephone surveys and provides a real-time assessment of US consumer sentiment.