Wednesday, November 16, 2011

Europe: European Bond Yields and more Debate on ECB

by Bill McBride on 11/16/2011 06:27:00 PM

Can't go a day without a post on Europe ...

Earlier today - during market hours - Fitch warned about possible contagion to U.S. banks from Europe. From Bloomberg: U.S. Banks Face Serious Risk From Europe Crisis, Fitch Says

“Fitch believes that unless the euro zone debt crisis is resolved in a timely and orderly manner, the broad credit outlook for the U.S. banking industry could worsen,” the New York-based rating company said today in a statement.
And on the ECB from the WSJ: Pressure Rises on the ECB
Pressure mounted on the European Central Bank to take drastic action to stabilize euro-zone bond markets, as investors shrugged off the bank's limited bond buying and European politicians sparred over the ECB's role in fighting the debt crisis.

ECB purchases of Italian and other euro-zone government bonds on Wednesday largely failed to halt the sell-off of struggling euro nations' debt. Investors continued to dump everything but German bunds and it became increasingly difficult to find private buyers for bonds issued by large, economically struggling countries such as Italy and Spain.
...
But Germany's leaders continued to reject calls for the ECB to print money and buy bonds on a bigger scale, insisting that only economic reforms by national governments can solve the debt crisis.

The ECB, with support from Germany, has so far refused to act as euro governments' lender of last resort, and has steadfastly insisted that its bond-purchasing program is temporary and limited in scope.
It seems that policymakers will have to decide soon between more ECB buying or the breakup of the euro-zone.

Below is a table for several European bond yields (links to Bloomberg).

The Italian 10 year bond yield is down to 7.00%. The Italian 2 year yield is down to 6.41%.

The Spanish 10 year bond yield has increased to 6.41%. The Spanish 2 year yield is up to 5.40%.

The Irish 10 year yield is up to 8.21%. The Portuguese 10 year yield is up to 11.3%.

The French 10 year bond yield is up to 3.71%. The Belgium 10 year yield is down slightly to 4.87%.

Greece2 Year5 Year10 Year
Portugal2 Year5 Year10 Year
Ireland2 Year5 Year10 Year
Spain2 Year5 Year10 Year
Italy2 Year5 Year10 Year
Belgium2 Year5 Year10 Year
France2 Year5 Year10 Year
Germany2 Year5 Year10 Year