Italian Government Borrowing Costs Are Plunging

This stat might blow your mind.

*ITALIAN TWO-YEAR NOTE YIELD DROPS TO RECORD-LOW 1.267% -Bloomberg

— Michael McDonough (@M_McDonough) April 22, 2013

That's right, short-term Italian borrowing costs have fallen to an all-time low.

Meanwhile, 10-year yields are also falling to a 2-year low today.

What gives?

Over the weekend, the Italian parliament convinced President Napolitano to stay on for another 7-year term.

The President isn't the Prime Minister, so Italy still lacks a proper government, after its split election in February, but the President does stuff like calls elections, and helps attempt to organize a government, so his agreement to stay in helps stability.

And beyond that, the thinking remains in Europe that the big countries will not be allowed to go bust. Even Italy.

They have horrendous growth problems that seem to be getting worse (and they lack a plan) but the actual sovereign debt problem just isn't the big worry.