European markets have been surprisingly quiet over the past several months, with the so-called “Draghi put” keeping bond vigilantes in check. The recent inconclusive Italian elections did send jitters through the market, which led Fitch to cut its sovereign credit rating on the Eurozone’s third largest economy to BBB+ from A-, while keeping a negative outlook. With a new round of elections looking increasingly likely, and against a backdrop of “acute economic weakness,” a new flare up of Europe’s sovereign debt crisis may be right around the corner as risk is accurately re-priced, Nomura’s research team suggests.
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