Bonds: Spanish 10 year yields reach above 7pc death point

Date: Friday 06 Jul 2012

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

Spain: 6.95% (+18bp)
Italy: 6.03% (+5bp)
France: 2.38% (-12bp)
Germany: 1.33% (-6bp)
UK: 1.59% (-6bp)
USA: 1.54% (-8bp)

Things are looking very dicey in the European bond market.

The failure yesterday of the European Central Bank to announce any direct measures to reduce the yield on Spanish and Italian debt led to a sell off today.

At one point the yield on 10 year Spanish bonds went above the 7% “death point” that saw Greece, Portugal and Ireland all putting out the begging bowl.

To make matters worse investors were reminded of the dire economic situation within Spain when figures showed industrial production fell 6.1% in May versus the prior year.

In Germany, the same industrial production metric rose 1.6% in April against a 2.1% decline in April, unsurprisingly the spread between German and Spanish yields widened.

Europe cannot afford yields at these levels for long.

BS

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