Southern Europe’s Bonds Lose Periphery Risk

Here’s what markets aren’t talking about but should be. Italy and Spain have just reached

the lowest borrowing cost gap versus Germany in 16 years, a dramatic move that signals something

deeper than a simple rally. For decades, investors treated southern European

debt as “periphery risk” — high interest yields, political instability, currency vulnerability.

Now those spreads have narrowed below historical norms, rewarding fiscal discipline,

stronger revenue collection, and surprisingly robust growth in places like Spain.

Investors who once demanded big premiums to lend to Rome or Madrid are now treating their sovereign

bonds almost like core European debt. This is not just a regional story. When bond markets