Europe Debt Plan Runs Off Bond Vigilantes – For Now

Europe Debt Plan Runs Off Bond Vigilantes – For Now

Reading headline after headline panning the latest Europe sovereign debt salvation plan from Germany and France, you might be tempted to think that yields were breaking out to new highs.

If so, you’d be wrong.  For the time being, at least, the bond market appears to be relatively appeased.

Since it’s likely that nobody really knows what’s going on, and is equally clueless, we’ve been focused on the 10 year bond yields for the big dawgs in the room, Italy and Spain (thanks to a heads up from our astute correspondent on the subject, Dr. Evil).

On that note, Italy’s yields have quietly pulled back a point(!) over the last week:

Italy 10 Year Bond Yields August 2011

Italy yields drop back to original breakout point.  (Source: Bloomberg)

As have Spain’s:

Spain 10 Year Bond Yields August 2011

While Spain yields actually drop below previous levels of resistance. (Source: Bloomberg)

Now the latest plan was announced AFTER the markets closed in Europe today – so by the time I wake up tomorrow, my words written here might well be toast.  But for the time being, the picture that the bond market is painting is MUCH brighter than the Europe headlines at would indicate.

I’m not suggesting that anything structurally has been solved.  Only that sometimes these disasters take longer to unfold than one would think.

Thanks for the input, WSJ…but I think we’ll just watch the tape instead.