Shrug of the shoulders

Much wailing and gnashing of teeth in the media as the Italian government bond yield hits 7%.  This say the armchair experts with the mikes in their hands is the end of the world as the Italians know it.

All cock of course. This is the yield on bonds already issued that has increased from 6.667% to 7%.  Not great, but in practical terms the higher yields will only hit the Italian government as their borrowings are refinanced, albeit that quite a lot has to be refinanced in the next year.

The bigger problem is that if you have a debt equal to 120% of GDP you have a problem with refinancing that debt.  The fact that you may have to pay an extra 0.36% of GDP per annum in interest in about 10 years when the entire portfolio has been refinanced is neither here nor there.

And for the benefit of those hacks who might think that markets don't buy government obligations at yields above 7%, here is a partial list of recent (last 30 years) UK government issues.  The coupon is given and the gilts were issued close to par so the implied yield was above 7%.

10% Conversion Stock 1996, 13¼% Treasury Loan 1997 , 10½% Exchequer Stock 1997 , 7% Treasury Convertible Stock 1997 , 8¾% Treasury Loan 1997 , 15% Exchequer Stock 1997 , 9¾% Exchequer Stock 1998 , 7¼% Treasury Stock 1998 , 14% Treasury Stock 1998-2001, 15½% Treasury Loan 1998, 12% Exchequer Stock 1998 , 9½% Treasury Loan 1999, 12% Exchequer Stock 1999-2002 , 12¼% Exchequer Stock 1999, 10½% Treasury Stock 1999 , 10¼% Conversion Stock 1999, 8½% Treasury Loan 2000, 9% Conversion Stock 2000 , 13% Treasury Stock 2000, 13¾% Treasury Stock 2000-2003 , 8% Treasury Principal Strip 07Dec2000, 8% Treasury Stock 2000 , 10% Treasury Stock 2001 , 11½% Treasury Stock 2001-2004 , 9½% Conversion Loan 2001, 9¾% Conversion Stock 2001 , 7% Treasury Stock 2001, 10% Conversion Stock 2002, 7% Treasury Principal Strip 07Jun2002, 7% Treasury Stock 2002 , 9½% Conversion Stock 2002 , 9¾% Treasury Stock 2002 , Treasury Coupon Strip 07Sep2002 , 8% Treasury Loan 2002-2006 , 9% Exchequer Stock 2002 , 11¾% Treasury Stock 2003-2007, Treasury Coupon Strip 07Mar2003 , 9¾% Conversion Loan 2003 , 2½% Index-linked Treasury Stock 2003 , 3½% Funding Stock 1999-2004 , 9% Treasury Stock 2003, 10% Treasury Stock 2003, 12½% Treasury Stock 2003-2005 , 13½% Treasury Stock 2004-2008, 10% Treasury Stock 2004 , 9½% Conversion Stock 2004, 9½% Conversion Stock 2005, 10½% Exchequer Stock 2005, 8½% Treasury Principal Strip 07Dec2005 , 8½% Treasury Stock 2005, 7¾% Treasury Stock 2006, 9¾% Conversion Stock 2006 , 7½% Treasury Stock 2006, 7½% Treasury Principal Strip 07Dec2006 , 8½% Treasury Loan 2007, 7¼% Treasury Principal Strip 07Dec2007, 7¼% Treasury Stock 2007 , 7¼% Treasury Stock 2007 WI , 9% Treasury Loan 2008, 8% Treasury Stock 2009, 9% Conversion Loan 2011, 7¾% Treasury Loan 2012-2015, 9% Treasury Stock 2012, 8% Treasury Stock 2013, 12% Exchequer Stock 2013-2017, 8% Treasury Stock 2015, 8% Treasury Principal Strip 07Dec2015 , 8¾% Treasury Stock 2017, 8% Treasury Principal Strip 07Jun2021, 8% Treasury Stock 2021