Rome is Burning: Margins On Italian Bonds Raised

Stocks are tummling today, and yields on Italian bonds are soaring as London's clearing house LCH.Clearnet increased the margin on Italy's debt.

The cost of using Italian bonds to raise funds rose close "to levels deemed unsustainable". Reuters.


"Banks use government bonds as collateral to access cash in the repurchase (repo) market, in which a handful of clearing houses play a vital role, assuming lending risks to provide institutions with the cash".
"When LCH.Clearnet Ltd took similar action on Portuguese and Irish debt as bond yields soared, it added to selling pressure on the paper. Both countries were later forced to seek bailouts".

10-year Italian government bond yields are now approaching 7%. As a reminder, a hge chunk if Italy's bonds are coming up for renewal, please see our previous posts.