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ImageShack.usLos analistas dicen que la deuda de Italia es insostenible, los yields se acercan a 7% y ese pais no podra pagar los intereses y prestarse dinero en los mercados publicos.
7% es la linea en la arena. 7% es la barrera psicologica, esta aun en la memoria de los inversionistas como Grecia, Portugal e Irlanda buscaros rescates cuando sus yields llegaron a ese nivel.
La deuda de Italia es $2.6 trillones.
MARKETSNOVEMBER 8, 2011.Italy Nears Tipping Point as Its Bond Yields Spike
By TOM LAURICELLA, MATT WIRZ and STEPHEN L. BERNARD
With Italian bond yields surging higher, analysts said Italy is at the brink of being unable to afford to borrow in the public markets.
Less than two weeks after European leaders unveiled an agreement that was designed to bolster confidence in the region, the yield on Italy's 10-year debt drew close to the 7% mark, a line in the sand of both practical and psychological importance to the market.
Psychologically, 7% has become a beacon due to the fact that Greece, Portugal and Ireland each sought bailouts soon after their debt reached these levels. While analysts said it is too simplistic to say that Italy will be forced to ask for support if its 10-year debt yields 7%, they said the recent selloff is taking the country to the tipping point.
"I don't know if 7% is the upper limit, or if it's 6.9% or 7.25%, but I do know [Italy] can't go on for very long having these kinds of bond yields," said Gabriel Stein, director at Lombard Street Research in London.
.In a practical sense, yields at these levels could force traders to post more collateral when borrowing against Italian bonds, because they are perceived as more risky. That potentially makes Italian bonds less attractive for banks, which historically have been among the biggest buyers of European government debt. This creates a vicious circle, in which higher yields lead to more selling, which in turn scares off buyers.
And with €1.9 trillion in debt ($2.62 trillion) and €200 billion of debt coming due next year, Italy can ill afford to see rates remain at these high levels.
Analysts said European officials will be hard-pressed to reverse the selling without a concrete plan to support Italy. Such a plan would need to be in the magnitude of the European Central Bank committing unlimited resources to guaranteeing member countries' debt, they said.
Yields on Italian debt have been rising steadily, with prices falling, for weeks, but Monday's selloff was particularly steep, according to Tradeweb data. The yield on the 10-year note jumped to 6.56% from 6.31% on Friday. That is up from 5.91% two weeks ago and 5.5% at the end of September. Bond yields move inversely to prices.
The picture is even worse for Italy judged by the Italian bond due in March 2022. The yield on that issue hit 6.88% Monday, up from 5.29% when it was sold at the end of August.
"At 7%, these really are extremely stressed levels," said Moyeen Islam a director for fixed-income strategy at Barclays Capital in London.
Sohail Malik, lead portfolio manager for special situations credit at European Credit Management, estimated Italy is paying about 3.42% on bonds coming due next year. Mr. Malik estimated that if that debt was all rolled over into new 10-year debt at 7%, it would create an extra €43 billion of interest costs over the life of the debt.
"Imagine doing that for two to three years of maturities at the same level," Mr. Malik said. "Unsustainable."
Market participants said the selling pressure came from long-term investors, such as pension funds, banks and insurers. They said Italian investors, who traditionally have been big buyers of Italian government debt, have stepped back from the market, contributing to the vacuum in which prices have fallen.
"The pace of the move tells you that there are no buyers," said Mark Schofield, global head of rate strategy at Citigroup in London.
Monday's surge in bond yields widened the gap between Italian and German 10-year bond yields to a euro-zone era record of 4.75 percentage points, up from 4.48 percentage points Friday.
In some ways, the widening of that spread has caused a vicious selling cycle thanks to rules that govern the use of government debt as collateral for borrowing money, otherwise known as repurchase, or repo, agreements.
Analysts point to the rules set by LCH.Clearnet Group Ltd., the main clearinghouse for repurchase agreements. LCH.Clearnet requires higher collateral for repo trades involving government bonds that yield 4.5% more than a basket of triple-A-rated European sovereign bonds for five consecutive days. Market watchers said Italy is on the cusp of falling into that riskier bucket.
LCH.Clearnet didn't respond to requests for comment.
Should the collateral requirements be triggered, it would make Italian debt less attractive for banks and investors who use their holdings as a cheap way to borrow money. Some market watchers said there has been selling of Italian debt in anticipation of the stricter guidelines.
The bigger issue, analysts said, is the damage to Italy's finances. Italy's debts are larger than the country's gross domestic product, and with an economy that is barely expanding, analysts said it could be impossible for Italy to make its way out of debt on its own.
"The fact that rates are close to 6.5% or 7% makes it very difficult for Italy to repay its debt in the long run," said Pavan Wadhwa, head of global interest rate strategy at J.P. Morgan.