The marked increase in the spreads on Italian and Greek government bonds as well as, to a more limited extent, in other euro-area countries, is a cause for concern. These are tensions that do not appear to be explained by the changing macroeconomic outlook.
For Italy, especially, our analyses indicate that a spread between the yields on Italian and German ten-year government bonds of less than 150 basis points would be justified by the fundamentals and, in any event, levels above 200 basis points would not. In recent weeks, the widening has intensified, accompanied by a progressive increase in market volatility.