European Bond Yield Summary 5/7/12

10-Year Yields:
Greece 22.85%
Portugal 11.13%
Hungary 7.99%
Spain 5.80%
Italy 5.49%
Belgium 3.16%
France 2.81%

Netherlands 2.14%
U.K. 2.01%
Finland 1.95%
U.S. 1.83%
Germany 1.58%

Hollande defeats Sarkozy in the France elections ushering in a socialistic vibe which is unfavorable for equities markets.  Hollande won by a 52/48 margin so it was a close election, thus, the move down in the U.S. futures is a bit tame. If Hollande would have won by a larger spread, the futures would be down twice or more the current numbers.  Also, the Greece anti-bailout parties won their elections, and are now scheduling more beach parties where the only words spoken are, "Pass the lotion." The Greece folks want money bags Germany to kick in more money so the beach parties can continue. Europe is undergoing quite a change. Merkel (Germany) and Hollande (France) must now develop a working relationship. The France-Germany Spread is 123 bips, no big change there either. Use this spread as a guide moving forward, running higher thru 130 and up means trouble ahead for Europe. 

The European markets are off about a percent. Euro banks are off about one to two percent. This is important since the U.S. banks kicked in the strong Friday market slide in the States.  Watch the XLF 15.18 level for the financial sector after the opening bell which represents a bull-bear line in the sand.

The yields are well behaved considering the turmoil.  Portugal is well under the 12.5% danger level. Hungary continues to sit on its danger level at 8%. Spain is 20 bips under 6% and Italy is now 50 bips under 6%. France is 20 bips under the important 3% level. The stronger nations all show yields moving towards or under 2%, the U.S. 10-year yield dropped 10 bips last week now printing 1.83%. This represents the U.S. economy now in Disinflation and falling towards Deflation. The asset relationship in place today is dollar up = euro down = commodities and copper down = equities down although euro is flat lining now.