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
- 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)
- 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)