Some very foreboding straws in the wind…
(Big hat tip to our regular reader and correspondent Dr. Evil, who greatly assisted with this piece!)
1. The spread on 10-year French debt over German bunds reached 2%, the highest since the formation of the euro. Lately we’ve seen the market increasingly question France’s ability to serve as a backstop for this mess, as its own financial strength is ironically weakened by these bailout plans by being forced itself to borrow at higher rates.
2. Yields on German 2-year bunds are just 40 bps while ECB rates are at 1.25% – suggesting they are not being viewed as equivalents by market participants.
Europe’s relentless thirst for German paper – and only German paper. (Source: Bloomberg)
3. Greece’s next bond to expire is yielding 1000%!
Suffice to say it’s been a tough year for these bondholders…