Bonds: Greek elections pile pressure on Spain and Italy

Date: Tuesday 15 May 2012

These were the yields and movements on some of the most watched 10 year bonds by the close in Europe:

Spain: 6.36% (+13bp)
Italy: 5.87% (+18bp)
France: 2.90% (+7bp)
Germany: 1.47% (+1bp)
UK: 1.89% (+2bp)
US: 1.78% (+1bp)

Confirmation today that there will be a second election in Greece saw pressure grow on both Spanish and Italian debt while German bunds remained at near record highs.

The securities of Europe’s biggest economy had fallen in early trading after figures revealed its own GDP grew 0.5% in the first quarter - higher than analysts had been expecting.

In the topsy turvy world of the debt market, good economic news on Germany means its own debt becomes slightly less appealing as investors bet German growth will help its other, less secure neighbours.

But that thin veneer of hope was dispelled when officials of the the Greek Presidency confirmed new elections in June - with the polls indicating the anti-bailout parties are likely to gain more support.

This means Greece could well leave the Eurozone, and brings into question the very existence of the single currency area.

Unsurprisingly, the market is fleeing to safety.

BS

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