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

Edward Harrison — Wed, 16 May 2012 10:53:38 +0000

Spanish bond yields are spiking with no obvious reason to believe they will come down anytime soon. That puts the Spanish-German 10-year spread at an all time high

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[Premium] Europe is on the brink of something very big

Edward Harrison — Wed, 16 May 2012 10:20:17 +0000

Euro zone bond markets have come completely unhinged this morning. Spanish 10-year yields have hit the highest level this year at 6.5%. While Italian 10-year yields broke above 6% for the first time since late January. Meanwhile, German yields have moved to a record low of 1.44%. We are now back to levels of stress we last saw during the Italian crisis in November and December. However, this time policy space has narrowed considerably. In short, Europe has reached the critical breaking point

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Norway dumps Irish and Portuguese bonds, Switzerland increases Sterling reserves

Marc Chandler — Fri, 04 May 2012 13:34:09 +0000

The Swiss National Bank reported its reserve figures yesterday and the increase in its sterling holdings are notable and may help explain the its relative strength, despite data a soft real sector reports, culminating in the news last week that, defying expectations, the UK economy contracted in Q1, the second consecutive quarter that the British economy shrank. Separately, Norway's sovereign wealth fund, the Government Pension Fund Global, indicated it has sold off its Irish and Portuguese bond holdings, pared its Spanish and Italian holdings and increased its exposure to Mexico, Brazil and Indian bonds

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[Premium] Daily Commentary: On Auction Results from Spain

Edward Harrison — Thu, 19 Apr 2012 12:33:19 +0000

Today’s big news was the bond auction in Spain. Spain’s auction went off without a hitch but at a cost. Spain sold 2.5 bln euros ($3.3 billion USD). The Spanish Treasury sold a 1.1 bln euro bond maturing 31 Oct 2014 (average yield: 3.463%, bid-to-cover: 3.3 vs 2.0 at previous auction in October). The Treasury

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LTRO operation is pushing Spanish banking system closer to collapse

Edward Harrison — Thu, 12 Apr 2012 18:52:27 +0000

I thought I'd point out that the already severely undercapitalised Spanish banking system is being crushed by the spike in Spanish sovereign yields. I continue to expect Europe to continue the extend and pretend approach, creating volatility and crisis. But in the end the issue will always be the same as to who writes the check

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Chart of the Day: Flight to safety – German Bunds edition

Edward Harrison — Tue, 10 Apr 2012 16:00:39 +0000

The German 2-year note has dropped below Japan's for the first time ever, with the German 2-year note yielding 0.109%, a record low. Japan's 2-year note yield is 0.111%. Meanwhile, the 10-year bund is at 1.638%, nearing the record low of 1.636% from September

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Italy’s debt is its biggest obstacle but Spain’s budget lacks credibility

Marc Chandler — Tue, 03 Apr 2012 16:18:00 +0000

The more Spanish officials talk about the budget the less credible it seems. The 10-year yield fell 11 bp on Friday when the budget first presented before the weekend. Now as more detail emerge as it goes to parliament, 10-year yields are rising. Italy reported that the Q1 state sector deficit declined by about 10% to 28.2 bln euros in Q1. This was completed due to the results in the month of March. Contrary to the conventional narrative about fiscal profligacy on the periphery, Italy's fiscal policy has been among the tightest in the euro zone as it is one of the few countries that can point to a primary budget surplus. But Italy has to run hard to stay in the same place

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Greece: the risk of another near-term default has increased

Marc Chandler — Mon, 02 Apr 2012 18:21:51 +0000

One Greek outstanding bond is a 450 mln euro FRN that is due May 15. It has a 30-day grace period to make the payment, according to press reports. The new Greek 10-year bond yield rose today to 20.55%. It is the fifth consecutive session that yields have risen and are at new highs since the new bonds were issued in early March. In the past five sessions, the yield has risen 50 bp. The German 10-year yields has fallen 16 bp. The spread stands at 1824 bp, widening by 66 bp or 3% over this period

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Time Unlikely To Be A Healer For Portugal’s Economy

Claus Vistesen — Mon, 02 Apr 2012 14:17:31 +0000

Despite comparisons with Greece, Portugal is not in entirely the same situation, at least not yet it isn't. Crucially, Portugal is currently under no obligation to deal with international or national creditors to increasing government debt issuance courtesy of joint aid programme administered by the EU and the IMF. So far so good. Portugal has time and while I am as certain as an economist can be that the country will need debt restructuring, the time between here and there may still prove crucial

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More on the rain in Spain (and the need for bank capital to cover ECB loans)

Macro Business — Wed, 28 Mar 2012 20:23:11 +0000

Back in November last year I posted on my confusion over the jubilation shown by the citizens of Spain as they elected Mariano Rajoy as their new political leader. Mr Rajoy’s strategy during the election campaign was to say very little about what he was actually intending to do to address his country’s financial problems, preferring to simply let the incumbent party fall on its own sword so that he could take the reins. It became obvious soon after the election that, despite his party’s best efforts to dodge questions, the intention was simply to continue with even more austerity. Since that post I have continually warned that although Spain is obviously a different country to Greece in regards to how its problems have manifested, it still faces significant macroeconomic challenges that were not being correctly reflected in the bond market

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More on the rain in Spain (and the need for bank capital to cover ECB loans) originally appeared on Credit Writedowns

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