Bonds: Fear still hangs over Eurozone

Date: Tuesday 03 Jan 2012

Yields on benchmark ten year bonds were up amongst the under-scrutiny countries within the Eurozone:

ITALY: 6.92% (+6bp)
SPAIN: 5.29% (+18bp)
FRANCE: 3.29% (+5bp)
U.K. 2.03% (+5.5bp)
GERMANY 1.9% (-0.7bp)
U.S. 1.93% (+5.4bp)

The numbers suggest there is no let up in pressure on Italy, France and Spain to reduce their budget deficits.

The fact US bond yields rose slightly implies there is some slackening of demand for low risk assets. Certainly, there was good news from the Institute for Supply Management’s U.S. factory index which climbed 1.2 points in December, from a November reading of 52.7.

Elsewhere, German unemployment fell by 22,000 in December, against a consensus reduction of 10,000.

Spanish unemployment rose very slightly, up just under 2000 according to a release from the country’s official data office.

In theory these numbers ought to have calmed the debt markets but the upward movement in yields, particularly for Italian and Spanish debt, does not bode well.

BS

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