European Bond Yields 2/14/12

On the day of love, Valentine's Day, Moody's shows no love for Italy, Spain and Portugal.  These three countries were downgraded and in addition, the surprising news was that France and the U.K. were placed on notice that they may lose their top ratings in the future.  The euro is lower but the affects are muted overall in the markets, the downgrades of Italy, Spain and Portugal are of no real surprise.

Asia markets did trail off lower on worries that the European slowdown will stall growth. Watch copper, JJC, very close today in the U.S. session. To add to the global drama, the BOJ unexpectedly announces stimulus measures which weakens the yen and boosts the dollar/yen up and over 78.

European Bond Yields:
Greece 32.98%
Portugal 11.93%
Hungary 8.50%
Italy 5.61%
Spain 5.29%
Australia 3.99%
Belgium 3.54%
France 2.93%
U.K. 2.12%
U.S. 1.97%
Germany 1.92%
Japan 0.97%

Yields are not significantly different from yesterday except for Hungary. The Hungary yield dropped 15 basis points in yield from yesterday, the ECB no doubt trying to maintain order and keeps plugging the holes in the dike. Finance ministers meet in Greece tomorrow. The U.K. gilt and France yields are moving flat after the Moody's news. Moody's does not mention Germany last night reaffirming Germany's position as the top economy in the Euro zone. Germany's ZEW Sentiment index is just released, better than expected, which boosts U.S. futures to the flat line and the euro moves to positive side.

The Portugal yield curve will be very interesting in light of the Moody's downgrade.  The Portual 2's, 5's and 10-year yields are 13.85%, 14.88% and 11.93%, respectively. Note that yield curve inversion exists between the 2's and 10's, and between the 5's and 10's, but not yet a complete inversion since the 2's need to move above the 5's. Nonetheless, the level of Portugal yields, as well as the inversion behavior signals troubled times ahead.