Bonds: Europe awaits a grand plan for crisis

Date: Wednesday 06 Jun 2012

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

Spain: 6.28% (-3bp)
Italy: 5.67% (+2bp)
France: 2.41% (+8bp)
Germany: 1.33% (+14bp)
UK: 1.66% (+14bp)
US: 1.66% (+9bp)

Safer bonds (Germany and UK) fell through Wednesday as the market began to suspect a coordinated effort to resolve the current phase of the Eurozone debt crisis could be on the cards.

Today the European Central Bank left its main interest rate on hold at 1% with the President, Mario Draghi, commenting that the ECB was ready to act to boost the faltering European economy.

There have also been reports in the German press that Spain may receive a “precautionary” credit line from the European Financial Stability Facility.

The big decision in front of the Eurozone is whether the member states are willing to cede yet more sovereignty to a more coordinated fiscal system. Reports suggesting this is the solution prefered by Germany continue to surface. The sense is that time is running out to implement such a grand, but urgent, plan.

BS

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