As the following update from the World Gold Counsel reminds us, at the end of October, Italy had 2,451.8 tonnes of gold, or roughly $61 billion dollars at today's price. We doubt we are the only ones keeping track of all this gold (most of it almost certainly 'safe and sound' about 150 feet deep under the infamous LIberty 33 location). We also doubt we are the only ones curious about its future, which we see as have five distinct possible outcomes: i) nothing; ii) it is currently being shipped quietly from The New York Fed to Italy for "general corporate purposes); iii) it has already been shipped and is currently being loaded up in Silvio's private jet; iv) the G-20 is already preparing to launch a formal demand that in order to remain in the Eurozone and to find the EFSF, which will be used to buy Italian bonds, Italy will have to do its patriotic duty and remit it to the ECB, an extortion attempt which was tried with Germany last week and which failed spectacularly; or v) it is being lent out to other countries who have long since sold their gold and continue to pretend they have some hard asset backing to the currencies issued by their own central banks. We hope to get an answer shortly.
Save this one for the archive files: The Italian 10 Year yield is now at precisely 6.66%. Alas, we doubt it will stay here for long: the Italian Treasury just announced it was cancelling its November 10 3 Month BOT auction due to, wait for it, "lack of specific cash requirements." Stick a fork in it.
With Italian 10 year bonds crossing the 6% yield threshold, it is worth seeing how other bonds behaved. It is too early to tell what path Italy will follow, but at least for the other countries, they traded similarly prior to the breach, and followed similar paths after the breach. Italy is too big, that I don’t think it can turn like Ireland did. If Italy moves much further, I think it will follow Portugal and Greece. They don’t have months to fix this, they have weeks, and they have been squandering them.
What was that Hugh Hendry quote that everyone loves?
UPDATE: BTP +483 over Bunds now as Px drops below EUR 87.5 as all ECB buys are now underwater
As 10Y BTP spreads to Bunds hover around 25bps wider on the day, the ECB's bluff has not only been called but they have been the sucker at the table no less than five times already today. With the spread between 2Y and 10Y BTPs also having dropped (yield curve flattened) over 30bps, the Italian bond complex is sending some rather disturbing messages. And for all those who feel the need to blame speculators - CDS is actually outperforming bonds as real money leaves Berlusconi's Bonds in a hurry.
- FERRARI SEES 'OUTSTANDING' 2011 AMID ECONOMIC UNCERTAINTIES.
What is today's most underreported news of the day, and the reason Brent is breaking out, is that according to WaPo, IAEA is about to report that Iran is on the verge of becoming a nuclear state: needless to say this is just the green light all of its enemies need to launch a pre-emptive strike (not to mention, GDP-boosting). Below is some must read commentary from Emad Mostaque of Religare Capital Markets on what this IAEA finding will mean for the region, for the world and for what really matters: capital markets.