Thursday, June 17, 2010

European Bond Spreads continue to widen

by Bill McBride on 6/17/2010 04:02:00 PM

Here are two graphs from the Atlanta Fed weekly Financial Highlights released today (graph as of June 16th):

Euro Bond Spreads Click on graph for larger image in new window.

From the Atlanta Fed:

After initially declining in early May, sovereign debt spreads have begun widening for peripheral euro-area countries. As of June 16, the 10-year bond spread (over German bonds) stands at 640 basis points (bps) for Greece, 283 bps for Ireland, 274 bps for Portugal, and 209 bps for Spain.

The spread to Spanish bonds has increased 110 bps since May 11, from 1% to 2.09%, while Portuguese bond spreads are 121 bps higher during the same period.
Note: The Atlanta Fed data is one day old. Nemo has links to the current data on the sidebar of his site.

The spreads have widened further today: Greece is up to 668 bps, Ireland 290 bps, Portugal 293 bps, and Spain 211 bps. Oh, and Hungary is up sharply to 495 bps.

Euro CDS Spreads
Similarly, while CDS spreads declined slightly last week, they are wide relative to earlier this year.
Apparently this is what IMF Managing Director Dominique Strauss-Kahn meant by "contained" last week.

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