Belgium, Spain, Italy Bond Spreads widens to record levels
Recent Greece bailout doesn’t seem to have much positive outcomes on investment world. Investors are still concern about Europe and it is reflected in bond yields of bigger economies like Italy and Spain. Bond yields of Belgium, Spain and Italian government bonds are now at record high when compared to benchmark German Bunds. The story is now shifting from Greece and Portugal to Spain and Italy. ECB and IMF are well aware the bailing out Italy, Belgium and Spain is virtually impossible. If these countries start defaulting then there might not be much options left then to sit and look at things.
Italian and Spanish 10-year bonds dropped, pushing yields up to euro-era records versus benchmark German bunds, on concern that slowing growth will hamper efforts to tame the nations’ debt loads.
“This has all the features of a self-fulfilling crisis,” said Harvinder Sian, a senior bond strategist at Royal Bank of Scotland Plc in London. “The rise in yields looks pretty relentless, and it doesn’t look as if the politicians are anywhere near to getting ahead of the curve.”
The yield on 10-year Italian bonds jumped 18 basis points to 6.18 percent as of 8:48 a.m. in London, the most since November 1997.
Spanish 10-year yields surged 16 basis points to 6.36 percent, pushing the spread over similar-maturity German debt up 19 basis points to 393 basis points. A 6.5 percent yield will be a key level for Spain, RBS’s Sian said.
The yield premium investors demand to hold Belgian 10-year bonds instead of benchmark bunds widened to a euro-era record of 202 basis points before an auction of as much as 2.8 billion euros of 105-and 168 day bills.
As US saved itself from defaulting this time, focus should now shift to Europe where policy makers are trying desperately to bring EU out of financial mess but they are, in this process, calling for ultimate collapse Europe which will have an holocaustic impact on financial markets across the world later. I have found a way to do my bit to save Europe, ‘I will pray to the God to save EU’.