The Macro Report | June 2018
Italy’s Political Opera
Italy’s Giuseppe Conte was sworn in to power in early June to head a new populist government — made up of an unlikely marriage between the anti-establishment 5-Star Movement (M5S) and the far-right League party. The oath ceremony ended a three-month-long political opera in the eurozone’s third largest economy. The inconclusive March elections, the political chaos in forming a government, and the anti-euro leanings of the coalition rattled Italian and global financial markets. The country remains vulnerable to high interest rates, high debt levels, and very low growth.
As Italian markets tumbled, global interest rates continued to trend higher. The yield on the benchmark 10-year U.S. Treasury crossed the 3% psychological barrier, setting a new five-year high. It signaled that higher rates are afoot in the world’s biggest bond market as the Federal Reserve tightens monetary policy. Higher oil prices, which have raised concerns about inflation, will be driven by supply factors, including the possibility that OPEC will boost output in the second half of the year.
Balancing act in Italy
A coalition government came to power in June, but its views on the euro, fiscal policy, and the European Union have rattled global financial markets.
The yield on the 10-year Treasury has crossed the 3% psychological barrier, signaling a steady rise in global rates and posing a challenge for riskier assets.
About the macro report
The Macro Report is written by members of Putnam’s Fixed Income team. With backgrounds in applied economics, currency and interest-rate analysis, and sovereign and local bond market dynamics, this group conducts macroeconomic research in support of Putnam’s global fixed-income strategies.
Michael Atkin, Portfolio Manager
Investing since 1988
Sovereign debt, global growth analysis
Albert Chan, CFA, Portfolio Manager
Interest-rate derivatives, government debt, risk analysis
Onsel Emre, PhD, Analyst
Inflation, risk analysis, global growth dynamics
Sterling Horne, Analyst
Politics and economics
Irina Solyanik, CFA, Analyst
Quantitive analysis, growth forecasting
Izzet Yildiz, PhD, Analyst
Labor market analysis, global growth dynamics