European Bond Yields 11-29-11

Latest prints show:
Italy 2-year yield is 7.36%
Italy 10-year yield is 7.37%
U.K. 10-year yield is 2.26%
German 10-year yield is 2.23%
U.S. 10-year yield is 2.01%

The Italy yield curve inversion across the 2-10 spread is now flat, but it makes no difference, Italy is likely in a recession already. The U.K. and Germany are trading at the same yield level. Germany yield moved higher to match the U.K. levels last week.

An interesting development yesterday was that for weeks now, European money would seek safety in Germany, exaclty like U.S. money will move into treasuries as investors seek safety when stocks sell off. As global markets moved up yesterday, with yields moving up as would be expected, in the U.S., the 10-year yield actually dropped from about 2.07% down into the mid 1.95%-ish area, before recovering this morning back to about 2%.  This means that money is seeking safety in the U.S. in lieu of Germany now, so the game is changing.  This behavior suggests that more and more investors are losing complete confidence in Europe.

More evidence of this shift will be apparent as European yields continue to climb, especially Germany, while the U.S. yields are flat or even lower. This behavior also highlights the importance of the timeline moving forward.  The Eurozone debt crisis train is speeding down the track but the political leaders are in the club car drinking booze, smokin' big cigars and making little progress in solving the situation. The higher the yields, the faster the train, and a curve is in the tracks just up ahead. That curve may be the EU Summit on 12/9/11, traders and markets will be expecting big things from this meeting.

Note Added 11/29/11 at 5:26 AM EST: Italy 2-year is 7.36%. Italy 5-year is 7.62%. Italy 10-year is 7.28%. Germany 2.32%.

Note Added 11/29/11 at 5:33 AM EST: Italy 2-year is 7.04%. Italy 5-year is 7.62%. Italy 10-year is 7.24%.

Note Added 11/29/11 at 6:00 AM EST:  Let's look at the entire curve. Italy 2-year is 7.16%. 5's are 7.73%. 10's are 7.35%. 30's are 7.29%. The inversion exists from the 5's to the 30's, the 2's have dropped back currently. Same idea, Italy and Europe more than likely in recession.