Italian Rebound Spread between Italian and German Compressed

Data published on Friday (2021-05-28) by the European Commission showed that Italy’s economic sentiment index rose 11 points from the previous month to 115.8 in May – by far the fastest monthly increase across all major eurozone economies and Italy’s strongest reading since 2000.

The resurgence of the virus in the late 2020 and early 2021 plunged Italy – along with other major eurozone economies – into a double-dip recession. But economists expect a return to growth across the eurozone in the second quarter of this year as vaccination rates rise and Covid-19 restrictions are eased.

Here is the 10Year Italian-German Bond spread prior to Covid-19:

Here is the 10Year Italian-German Bond spread for the last couple of months:

As the spread between the Italian-German 10Y Bond “compressed” or “narrowed”, it is a positive sign as it implied recovery or “risk-off”, otherwise, it would imply “crisis” or “risk-on”.

So, for now, we are comfortably to believe that for now things in Eurozone is improving.

Reference:

Financial Times, 2021-05-28, “Italian Rebound Helps Eurozone’s Recovery From Pandemic Recession”