European Bond Yields 1/27/12

The Greece drama, or more correctly Greek Tragedy, continues along.  Resolution to the latest Greece debt crisis with bondholder negotiations is promised every couple days but when the target day comes, a cup of coffee is poured and the date pushed forward again. The latest goal was for Greece to announce the plan for bondholders today but today is already long in the tooth.

Portugal is blowing out. Over a week ago we could see the yields climbing creating a new problem that will have to be pulled to the front burner.  Portugal prints 14.83% only 17 basis points below 15%. Portugal blowing out above 15% will receive lots more attention. The Portugal 2-year is 16.11%; note the inversion as compared to the 10-year at 14.83%.

10-Year Yields:
Greece 33.53%
Portugal 14.83%
Hungary 8.75%
Italy 5.97%
Spain 5.06%
Belgium 3.78%
France 3.10%
U.K. 2.09%
U.S. 1.95%
Germany 1.89%
Japan 0.97%

On the positive side, Italy is under 6%, not seen since early December. However, isn't it pitiful to consider a move under 6% to be positive? Spain is moving down towartds the 5% level.  Germany moves under 1.90% as money continues to seek safety there.  Interestingly, France is moving down stubbornly slow, maintaining the 3.10% level, that in itself is a tell.

Japan must be monitored closely as rating agencies discuss their dissatisfaction with Japan and the threats of a downgrade are growing. If Japan experiences any rise in rates from the paltry 1% level shown above, the country will lunge into turmoil.  The events coming out of left field are the ones that impact markets the most.  Currently, Portugal, Hungary and Japan are major concerns.

Note Added 1/27/12 at 8:25 AM EST:  Here we go folks, Portugal is blowing out, now 14.90%, only 10 bips from 15%.  Obviously, as the yield sky rockets the spread between Portugal and the other Euro nations widens.  Hang on tight.

Note Added 1/27/12 at 11:36 AM EST:  Portugal 10-year yield is blowing out. Last print is 15.22%, jumping 40 basis points this morning! Looks like Portugal is losing control and they will need a second bailout immediately.  Greece promised a resolution with the bond holders today but the weekend is now more realistic.  The E.U. Summit on Monday now creates a firm deadline.  Greece needs resolved by Monday and now Portugal is spinning out of control perhaps requiring immediate intervention.

Note Added 1/27/12 at 1:12 PM EST:  Fitch rating agency downgrades Belgium, Cypress, Italy, Slovenia and Spain. The euro trails lower.

Note Added 1/28/12 at 8:16 AM EST:  Greece continues to try and find resolution with bond holders before the E.U. Summit on Monday. It's a pizza weekend in Europe as teams work day and night to handle this latest mess.  Perhaps they should keep the pizza man on speed dial since Portugal, perhaps Hungary, will quickly need attention as well.