European Bond Yields 6/18/12

10-Year Yields:
Greece 26.07%
Portugal 10.53%
Spain 7.13%
Italy 6.07%
Belgium 3.11%
France 2.60%
Austria 2.27%
Netherlands 1.96%
Finland 1.77%
U.K. 1.63%
U.S. 1.59%
Germany 1.44%

The Greece election results back the conservative candidate, Samaras, which is a vote to stay in the euro and suppor the bailout measures. Samaras wins with only 30% of the vote. The socialistic candidate that supported the euro but wanted to renegotiate the austeriy measures, Tsipras, took about 28% of the vote. It appears the older population supported Samaras while the younger population supported Tsipras. These generational battles, old versus young, should increase in countries all around the world since the older generations have sold out their kids and grandchildren. 40% of Greece voters did not bother, choosing to go to the beach instead. Pass the lotion.

The S&P futures popped ten points once the election results showed the conservatives winning, but as of about 4 AM EST, went negative, resulting in about a fifteen point bearish swing overnight.  The equity rally appears to have only lasted a few hours this time. Note that Spain yields have blown out again over 7% and Italy remains above 6%. The France-Germany spread is 116 below the 125 gauge Keystone is currently referencing so the European debt crisis is at least at an eerie calm. The Spain-Germany spread, however, has blown out to 568 well above the 520 level Keystone is using to guage Spain's troubles. Greece is already on the back burner; Spain is the major problem and then it will move to Italy where the game will ultimately end. The Italy-Germany spread is 463; Keystone is using a spread of 470 as a warning signal so the spread is nearly there.

The Portugal yield curve remains inverted from the 5's thru the 30's. Watch the Spain 10 and 30-year yields, now at 7.13% and 7.17%, respectively, only four basis points from inverting, which signals recession and additional turmoil and trouble moving forward. Hang on to your hat, this week should be a bumpy ride. Traders expect Chairman Bernanke to deliver some form of QE3 on Wednesday mid-day.  The markets expect a pony, so he better deliver a pony, otherwise, the party will turn into a funeral. Bank runs, the flow of capital, from Greece, Spain and Italy remain a major concern.