As mentioned yesterday, listen for the bell to ring when Spain hits 7% yield on the 10-year. Do you hear it ringing?
10-Year Yields:
Greece 26.51%
Portugal 10.14%
Spain 7.00%
Italy 6.27%
Belgium 3.22%
France 2.63%
Austria 2.37%
Netherlands 2.05%
Finland 1.87%
U.K. 1.63%
U.S. 1.59%
Germany 1.50%
Spain at 7% signals increased turmoil and negativity in Europe. Spain will need a sovereign bailout. The peak in the Spain 10-year occurred on 6/18/12 with a high of 7.285% and close at 7.158%. Thus, use these two numbers as further danger signals; hitting 7.16% would signal that the Spanish boat is going over the falls and if the prior intrasession high at 7.285% is taken out, the boat will be crashed upon the rocks below. The Italy 10-year yield is well over 6% now also signaling danger. Use the 6.5% level as a sign that Italy is in serious trouble. Italy has not seen this 6.27% area since January, five months ago.
Looking at the spreads, the Spain-Germany spread is 550 well over our danger level of interest at 520 and higher. The Italy-Germany spread is 477 above our danger level of interest at 470 and higher. The France-Germany spread, a useful tool to gauge the status of the overall European debt crisis, is 113, remaining below our level of interest at 125 and higher, for now.
Germany is at 1.50% for the 10-year. Employment data minutes ago was worse than expected, Germany's jobless rate moves up to 6.8% indicating that the European debt crisis is having an impact on the German economy. The much-awaited Euro Summit is in progress. It was all smiles for the cameras last night. Angela Merkel is now the most powerful person on the planet, holding the fate of global markets in her hands. The European Club Med countries were playing pass the lotion on the beach while Germany kept their nose to the grindstone, now Germany is expected to bailout these profligate-spending countries, like Daddy Warbucks always there to save Little Orpan Annie. U.S. futures were flat one-half hour ago but are deteriorating, the S&P's now down over eight points. Focus on Spain; watch the 7.00%, 7.16% and 7.29% levels moving forward which correspond to trouble, serious trouble, and it may be too late, respectively.
Remember KS, that Germany benefits from the relatively low priced Euro possibly more than any other Euro country. German exports of goods and services were 47% of GDP in 2010. If they were to leave and go back to the Deutsche Mark, that would mean much higher priced exports which would put a severe dent in German GDP.
ReplyDeleteNot to mention all those 100's of billions it was more than happy to lend and collect the interest to its more profligate piggish peers.
All true Anon, ther are always two sides. Keystone is simply an armchair Austrian economist.
DeleteReady to rip lets trade shall we...
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