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While oil and gold have fallen, the yields (interest rates) on US and UK government debt has risen as traders move back out of risky assets.
The second argument, which is the one that Robert Rubin put forward in the nineteen-nineties, has a chance of working when bond yields (interest rates) are unusually elevated.
The political chaos threatens to bring wider contagion in eurozone financial markets, with Italy in the firing line as yields (interest rates) on government bonds reach historic highs and Silvio Berlusconi loses his grip on the reins of power.
9.12am BST If you'd declared two years ago that Spanish bond yields (interest rates) would be below the US equivalent today, you'd probably have been sent to a dark room to recover.
Severe cracks are appearing in many final salary-style pension schemes because what appear to be esoteric movements in gilt yields – interest paid on government bonds – are having a dramatic impact on the financial viability of pensions.
With yields (interest rates) on Italian government bonds rising above an unsustainable 6%, Berlusconi on Sunday pushed on with his own plan to save Italy from meltdown claiming his majority was solid and outlining liberalisation measures he hopes to sign off in parliament this month, including asset sell-offs, tax breaks to boost employment and the prising open of closed professions.
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The selloff has driven up the yield (interest rate) on benchmark Italian 10-year bonds to 3.15%, from 3.06% on Friday (yields rise when prices fall).
Euro-zone countries that fail to meet the targets would have to make deposits that would initially yield interest.
The chart below shows the yield (interest rate) on German government bonds compared with Italian and Spanish government bonds – structural problems with economies are concerning markets too.
1.14pm BST British government bonds have fallen in value today, pushing up the yield (interest rate) on benchmark 10-year gilts.
The price on Italian 10-year bonds has fallen, pushing up the yield (interest rate) by eight basis points to 4.32% (from 4.24% last night).
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