Back in January when diverging credit profiles within the eurozone reached a fever pitch amid downgrades of the likes of Ireland, Portugal, Spain and Greece, spreads between German and Italian debt widened to 170 basis points. A Moody’s analyst says that may have been an “overshoot”, today’s word of the day.
That may be, but spreads today are not far from those extremely wide levels and are headed back in that direction as investors seek out quality at the expense of riskier assets. Italian debt would definitely fall into the later category, though it is not in the same category as the other PIGS. Italy is home to one of Europe’s biggest banks, Unicredit, a bank that is heavily exposed to Eastern Europe, according to recent media reports.
