Just when you thought the Greek circus was over — it isn’t! Prime Minister George Papandreou dropped a bombshell Monday when he announced that Greece would hold a referendum to approve (or disapprove) the country’s latest bailout package. The next day, a Greek lawmaker pooh-poohed the idea that the proposed referendum would actually take place, but the damage to investor confidence was already done.
Global stocks plunged Tuesday. Meanwhile, the price of a package of long-dated U.S. Treasury bonds jumped 7% earlier this week. Things stabilized Wednesday, but it’s anybody’s guess how long that will last.
Despite that notorious downgrade by Standard & Poor’s in early August, investors still view U.S. government paper as one of the world’s safest havens. Italian paper is another story: Yields on 10-year Italian government bonds surged Tuesday to 6.3%, even higher than at the peak of the panic in August. Read