Goldman: Italy systematic spillovers could push EURUSD down 5 big figures, but...

... they do not see spillover occurring

Goldman is out saying the Italy systematic spillover could push EURUSD down 5 big figures, but does not see a big ripple effect happening.

They add:

• Italian government bond yields incorporate 40-50 bps political risk premium
• Fair value of Italy-Germany 10 year spread is around 120 bps. Current spread is about 186 bps
• Does not see Italy spreads widening to levels that would create systematic ripple effects across Eurozone

The German 10 year is trading at 0.5% while the Italy 10 year has shot up to 2.38% on the government concerns. So the spread is about 188 pips now.