|Source: Capital Pixel|
Now it's about execution, and a key indicator will be Italian bond yields - in particular the 10-year Italian bond yield. To the extent that its level (5.91%) comes down and especially its spread ( +3.50%) to the 10-year German Bund narrows, it is an indication that pressures are easing. In particular, it indicates a lessening in the probability of contagion - the spreading of the crisis throughout the region. Another way to say this is: it indicates the EFSF is sufficient. A spreading of the crisis to Italy, etc. could not be handled by a $1 trillion EFSF.
The German Bund is, of course, a benchmark throughout Europe given the strict monetary policy the German central bank followed after the country's episode with hyperinflation during the 1930s.
Following European Bond Yields
One of the really good sources for following the yield on the Italian 10-year bond, along with other European yields, is the Financial Times financial data site:
|Source: Financial Times|
This chart from The Economist provides a longer term perspective and shows what happened to Greek debt as the crisis unfolded:
|Source: The Economist 10/27/2011|