Whether it is due to contagion from the latest emerging markets selloff, or growing concerns about Italy's budget demands, another market that has gotten whacked on Thursday is the Italian bond market where BTP futures have reversed earlier post-auction gains, dropping to a day low as risk-off sentiment spreads across markets.
As a result, the Italian curve is bear flattening, with the 2y +14bps to 1.30%...
... and the 10y BTP yield has jumped +8bps to 3.30%; 5y +5bps to 2.45%;
Futures are selling off across the board.
Today's selling brings the 10Y yield to the level last seen during the furious May selloff.
Speaking to Bloomberg, one London-based trader sees selling at the long-end of the BTP curve, though "no specific catalyst evident."
Should the EM carnage accelerate, keep a close eye on Italy to see if contagion spreads to the weakest of the core markets....