The new political paradigm has thrown up another populist government in Italy, threatening the European project. Meanwhile in the US, could "Operation Twist Again" come into play as investors stress about ever-flatter yield curves?
It's strangely apt that the Five Star Movement is part of the populist Italian coalition; the stars can help cover the expletives that Macron and Merkel are likely uttering as the realise the impacts for Europe. On the other side of the pond, markets are focussed on flatter yield curves and whether they are forecasting a future recession. If they're worrying you as much as they are us, then my recent interview with Marcus Karlsson and Caroline Hepker on Bloomberg Radio is an opportunity to hear our latest thoughts.
Political risk is back with a vengeance in Italy. As the third largest global issuer of government bonds after the US and Japan, the country is too big to be allowed to fail without severe contagion to the global financial system. However, it is also too big to bail out comfortably using tried and tested mechanisms.