Sunday’s general election saw Greece’s centre-right New Democracy party win an outright majority in parliament. The result had been widely expected with the spread of Greek government bond yields over their German counterparts falling by roughly 70 basis points over the past month. The fiscal adjustments made by previous governments mean that Greece’s public finances are manageable in the short term, but the country’s elevated debt burden still limits the scope for any dramatic loosening of fiscal policy. Refresh the chart in your browser | Edit chart in Datastream The chart in this article has been created using Chartbook on Datastream. The Chartbook was

Although they continue to be volatile, Italian spreads have dipped below 300 basis points in recent days amid speculation that the country’s government may be willing to cut a budget deal with the EU. Indeed, according to Fathom’s proprietary indicator, the market-implied probability of a default by the Mediterranean sovereign edged down to 14.8% in November.[1] Refresh the chart in your browser | Edit chart in Datastream Refresh the chart in your browser | Edit chart in Datastream As Fathom noted to clients last week, the market’s initial reaction to the coalition’s fiscal plans had perhaps caused Italian bonds to

Fathom’s Sovereign Fragility Index (SFI) aims to provide an objective measure of the underlying risk attached to government debt. Therefore, a comparison of the SFI-implied and observed spreads is one way to observe the effects of unconventional monetary policy and swings in market sentiment. At present, government bond yields remain significantly below the levels implied by the SFI across most of the euro area periphery with financing conditions relatively benign. Italy, however, remains an exception to this with ten-year yields remaining above the 2.5% predicted by the SFI, amid the political uncertainty generated by the government’s confrontation with the EU.