Monday, September 05, 2011

Europe: Service Sector Slows, Stocks Fall, Bond Yields move higher

by Calculated Risk on 9/05/2011 08:50:00 AM

From the Telegraph: "Eurozone service sector [slowed] and the Purchasing Managers Index figures show services activity slowed to its lowest rate since September 2009. The eurozone PMI figure slipped to 51.5 in August, down from 51.6 in July."

"The [U.K.] guage of services activity, which makes up the biggest part of the British economy and includes shops and restaurants, fell to 51.1 in August from 55.4 in July"

From the WSJ: U.S. Lawsuit Pressures Bank Shares

Shares in U.K. and European banks slumped Monday after several institutions were named in a lawsuit Friday alleging they sold risky home loans to U.S. housing agencies Fannie Mae and Freddie Mac.

The suit by the Federal Housing Finance Agency in New York and Connecticut courts alleged that units of 17 banks including Royal Bank of Scotland Group PLC, Barclays PLC, HSBC Holdings PLC, Deutsche Bank AG, Credit Suisse AG and Société Générale SA, misrepresented the risks of $196 billion in home mortgage-loan securities sold to the agencies in a four-year period, making it the largest legal action by a federal regulator over the mortgage meltdown.
The Greek 2 year yield is at 49.99%!

Here is a graph of the 10 year spread (Italy to Germany) from Bloomberg. And for Spain to Germany. The Italian spread is at 365, most of the way back up to the high of 389 on Aug 4th, and the Spanish spread is at 330, still down from 398 on Aug 4th. Most of the increase in the spread is because the German 10 year yield is at 1.9%. (The U.S. Ten Year is slightly under 2% too).

The Portuguese 2 year yield is up to 13.6%. Also the Irish 2 year yield is at 8.5%.

Here are the links for bond yields for several countries (source: Bloomberg):

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