Wednesday, November 9, 2011

Word of the week- lo spread

Some of you may have been following the (not very good news) in the Italian media. Of course we know they like to use English words. So what is this spread they're talking about with alarming frequency?

I'm glad you asked. The financial term "yield spread" refers to the difference in rates of return between investments. In this case, it is the difference between the yield of Italian government bonds (buoni del Tesoro or BTP) and the corresponding German bonds as measured in points. This is an indication of the relative strengths of the respective economies. Today the spread was at 553 according to Repubblica and 575 according to Corriere, both record highs.

As of this writing, Berlusconi is on his way out and well-respected economist Mario Monti may be in. You will be pleased to know that Monti is about as far from Berlusconi as one human being can possibly be from another. There is a considerable spread, not to say abyss, between the two men.