Big investors felt comfortable owning big stakes of Italian debt in part because they knew they could sell without much difficulty. That has changed.
“It used to be one of the most liquid markets out there, but it isn’t anymore,” said Peter Schaffrik, head of European rates strategy at RBC Capital Markets in London. Not long ago, an investor had little problem buying or selling €500 million of Italian bonds at a clip, he said. “Now it’s difficult to trade more than €50 million.” The worsened trading conditions have led to more-exaggerated moves.
via Italy Fears Rattle World’s Investors – WSJ.com.
Liquidity is drying up in the Italian bond market, making it near impossible to roll-over maturing debt issues. The Italian bond market is third biggest in the world. If the EMU struggled to reach an accord over Greece, what chance do they have now?