This update is mostly a chart, which mostly speaks for itself. Long story short, bonds caught a break heading into the noon hour, with yields rallying from 10am through 12-1pm. When we overlay a barometer for Italy's credit risk (German vs Italian 10yr yield spread), we see strong correlation.
We can also see that Italy probably deserves some credit for the 5am-8am rally. This is most likely due to a speech by the new Prime Minister that had populist undertones despite offering reassurance about Italy's EU membership.
Bottom line: global bond markets are still tuned in to potential future risks that could arise due to Italy's new government, even if we're no longer talking about an imminent Euro exit. The absence of other data or events probably added to the impact of the Prime Ministers speech today.
