On Wednesday Italy will be conducting a 10-yr BTP auction that is sure to make waves one way or another.

Italian 10-Yr BTP Auction (Wednesday, May 30, at 5:45 a.m. ET)


  • Italian debt has sold off sharply in recent weeks amid mounting concerns about Italy's political situation and the specter of a populist government coming to power.
  • Italy now appears on track for a snap election in August, which some think will be a referendum on EU membership.
  • Weak demand at the auction (after rates have already spiked) will fuel concerns that a further backup in rates will be seen.  Weak demand for 10-yr Italian debt likely to feed ongoing flight-to-safety in 10-yr German bund and continued weakness in the euro and debt of peripheral eurozone countries.
  • Further drop in yield in the benchmark German bund is apt to drive continued interest-rate differential trades that pressure rates in the U.S. Treasury market lower


What's Affected?

  • iShares MSCI Italy Capped (EWI)
  • Regional ETFs
    • Vanguard FTSE Europe (VGK)
    • iShares Europe (IEV)
    • SPDR S&P Euro STOXX 50 ETF (FEZ)
    • Wisdom tree Europe Hedged Equity ETF (HEDJ)
    • iShares MSCI Germany (EWG)
    • iShares MSCI France (EWQ)
    • iShares MSCI Spain Capped (EWP)
  • Currencies
    • EUR/USD
    • EUR/CHF
    • EUR/JPY
    • GBP/USD
    • USD/CHF
  • Sovereign bonds
  • S&P futures
  • Index ETFs
    • SPDR S&P 500 ETF (SPY)
    • PowerShares QQQ ETF (QQQ)
    • iShares Russell 2000 (IWM)
    • SPDR Dow Jones Industrial Average (DIA)