10-Year Yields:
Greece 29.40%
Portugal 10.67%
Spain 6.66%
Italy 6.10%
Belgium 3.21%
France 2.75%
Austria 2.41%
Netherlands 2.04%
Finland 1.86%
U.K. 1.73%
U.S. 1.67%
Germany 1.51%
Portugal 2-Year Yield 9.21%
Portugal 5-Year Yield 11.79%
Portugal 10-Year Yield 10.67%
Portugal 30-Year Yield 9.68%
Spain 2-Year Yield 4.82%
Spain 5-Year Yield 5.97%
Spain 10-Year Yield 6.67%
Spain 30-Year Yield 6.86%
Italy 2-Year Yield 4.49%
Italy 5-Year Yield 5.62%
Italy 10-Year Yield 6.11%
Italy 30-Year Yield 6.49%
Australia 3.06%
Japan 0.86%
The market-shattering news yesterday was the Spain 10-year yield moving above 6.8%, a euro-era high. Italy yield blew out to the upside as well, following along, clearly showing that contagion across Europe is very much in play. The Spanish government will be next in line for a bailout. The Italy yield has not seen this high a level since last Fall, as this year began, illustrating the developing urgency for Europe. Today, yields are calming, Spain is at the infamous and ominous 666 number while Italy remains above 6% at 6.10%. Italy moving above 6.5% will signal major trouble. Any buoyancy in the Spain yield will signal ongoing trouble.
Germany yield popped 15 basis points since yesterday from the low to mid 1.3% area to over 1.5% this morning, the highest level since 5/11/12, a month ago. Thus, some money is moving out of Germany's perceived safer haven. The Spain-Germany spread is 515 points, not much of an improvement since yesterday since both yields moved higher. The spread was 464 on Monday. Perhaps the 520 spread level can be used as a gauge for More European trouble above 520, less below 520. The France-Germany spread, a primary gauge for European debt crisis status, is 124, also not much of an improvement from yesterday. On Monday, the spread was 117, perhaps a spread number of 125 will be useful as a gauge moving forward, above 125 signals the European mess is worsening, below 125 and some calmness is returning.
A more complete picture of the Portugal, Spain and Italy yields are displayed above. Note the inversion in Portugal for the 5's thru the 30's remains for many weeks now. Yield curve inversions are a signal of recession. The Spain 10's and 30's are tightening, now only 19 basis points away from each other so keep an eye on that. The shorter-duration bills and notes, the 2's and 5's require close monitoring for Spain and Italy moving forward. For the Spain 2-year, watch the 5% level and for the 5-year watch the 6% level. For the Italy 2-year, watch the 4.5% level. For the Italy 5-year, it is already blowing out above prior levels of interest. Simply monitor the Spain and Italy yields to note any inversions that may occur as summer approaches. The U.S. futures were flat to positive an hour ago but have steadily leaked lower; the S&P futures now down about 4 points.
Hi Keystone,
ReplyDeleteWhat do you think about crude oil? bottomed or is 70-75 in the cards still?
many thanks
Andy
Hello Andy, oil trading is not for the faint of heart. The $WTIC (West Texas) oil daily chart bounced 3% yesterday due to the positive divergence so the time for to take advantage of that move was a day ago. The daily chart is encouraging for price moving forward but the weekly chart i snot as convincing, the MACD line would like to see another low. The 200-week MA is sloping down which is negative with this level at 81 which has served as support for the last three weeks. A guess would be that a near term bottom may be in place at the 80-81 area. It does not look attractive as a trade from either side, however, and there are better tickers to play than oil. Oil may be able to use 78-82 as support but if this fails, 68-72 would be an attractive entry point and this will be a better wash-out price for oil. Watch the 200-week MA at 81.
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