With three hours of trading left in the session the major indices are down over 2% - and why??
Well today the answer is Italy. Even though the country has a primary budget surplus (balance before interest payments), they just happen to be next in line to get hammered by bond traders. The yield on the Italian 10-year bonds surged through 7%, the level many view as the threshold of how high rates can go without the country running into trouble making payments.
The elephant in the room was Ireland a couple years ago, then Greece, now Italy, and next is….. France!
Yes, the spread between French and German bonds hit 1.47 percentage points today (an all-time high since the Euro began), well higher than the 0.45 spread last year.
The iShares France ETF ($EWQ) is down 5% and the iShares Italy ETF ($EWI) is losing 8%. The related bond ETFs are also falling, the SPDR International Treasury Bond ETF ($BWX) is down 1.4%.
In the US the hardest hit sector is the Metals & Mining ($XME), down 5%. Even though every entire sector ETFs we follow are negative, the best performers are the Utilities ($XLU) and Consumer Staples ($XLP).
The level to watch on the S&P 500 is 1230-1250 range – and yep it is trading right in there now!!
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