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Chart of the day: The German-Spanish 10 Year Spread is at an all time high

Spanish bond yields are spiking with no obvious reason to believe they will come down anytime soon. They briefly hit 6.5%. But they are now down somewhat to 6.29% since then. That puts the Spanish-German 10-year spread at an all time high.

(Chart from Bloomberg)

With Italian yields also spiking and Greek banks losing 700 million euros of deposits a day, I think Europe is on the brink of something very big. As I wrote in January, we will have to see another crisis which threatens Italy or Spain before we get a more definitive policy response. Will it be a firm ECB backstop, Eurobonds, the rumored EuroTARP. It’s not clear at this point. But of those three the EuroTARP is the only one that has any policy traction right now. So if I had to bet, I’d bet on bank recaps.

About 

Edward Harrison is the founder of Credit Writedowns and a former career diplomat, investment banker and technology executive with over twenty years of business experience. He is also a regular economic and financial commentator on BBC World News, CNBC Television, Business News Network, CBC, Fox Television and RT Television. He speaks six languages and reads another five, skills he uses to provide a more global perspective. Edward holds an MBA in Finance from Columbia University and a BA in Economics from Dartmouth College. Edward also writes a premium financial newsletter. Sign up here for a free trial.