Bond Markets Weaker As Italian Exit Polls Start Hitting
Italian election results are generally living up to the hype with markets breathing a collective sigh of relief after the first exit polls show austerity-friendly Bersani with a wide enough lead to form a government. Polls closed at 9am Eastern time and Italian 10yr yields dropped from 4.3 to 4.24 in just under 3 minutes.
Throughout the overnight session Italian 10's have been in an almost perfectly inverse tango with German and US debt with the latest move hurting Bunds more but lifting US 10's over 2.0%. Clearly, markets were waiting for elections results more than anything this morning and clearly, a Bersani victory hasn't been fully priced in.
10's are currently right at 2.00% and Fannie 3.0s are down 6 ticks on the morning at 102-26 after opening at 102-27 and trading a narrow 3 tick range so far. S&P futures are up nearly 10 points from Friday's 4pm levels.
There's no significant domestic economic data today and Italian elections are expected to continue to be the morning focus. As we've noted, Bersani should have been largely priced in so we don't necessarily expect a challenge to the higher yield ends of the range in 10's, but there may be some additional volatility before (and slightly after) election results are confirmed.