Liquidity and the Italian bond standoff | FT Alphaville

Liquidity and the Italian bond standoff

In addition to spiking yields, seems like the critical issue with the Italian bond market on Wednesday (at least as quoted by Reuters) is that there is little to no volume going through some issues.

That would be critical issues like the December 2012 BTPs, the mainstay of MF Global’s ill-fated trade.

Bond IT456463, for example, was being quoted with a bid/ask yield spread of 7.149/5.913 per cent.

Bond IT428433, meanwhile, was being quoted at 7.088/5.273 per cent.

Only as we were typing did a trade finally go through at the offer rate on both bonds, but volumes were still slim..

One of the widest bid/asks, meanwhile, was seen in the June 2013 bond which was being quoted at a bid ask of 9.247 / 5.866 per cent:

Bid/asks bonds post June 2013 were significantly tighter.

With liquidity at the front end this bad, no wonder the yield curve is inverting.