European Bond Yield Summary 7/20/12; Spain-Germany Spread Blowing Out

10-Year Yields:
Greece 25.34%
Portugal 10.53%
Spain 7.01%
Italy 5.98%

Belgium 2.42%
France 2.05%
Austria 1.86%
Netherlands 1.64%
U.K. 1.51%
U.S. 1.49%
Finland 1.44%
Germany 1.21%

Portugal 2-Year Yield 7.60%
Portugal 5-Year Yield 9.85%
Portugal 10-Year Yield 10.53%
Portugal 30-Year Yield 9.53%

Spain 2-Year Yield 5.13%
Spain 5-Year Yield 6.42%
Spain 10-Year Yield 7.01%
Spain 30-Year Yield 7.16%

Italy 2-Year Yield 3.56%
Italy 5-Year Yield 5.31%
Italy 10-Year Yield 5.98%
Italy 30-Year Yield 6.49%

The European yields continue to print record levels.  For the troubled nations, Portugal remains above 10.5% but not up near the 12 to 13% levels that caused extreme stress.  Spain is over the 7% level, where other nations received bailouts, and Italy remains at or above 6% on the fringe of causing turmoil once again.  Europe exhibits an eerie calm currently.  Oddly, in this bazarro world, the European equity markets are now enjoying a seventh week of gains, just like the U.S. equity markets, after placing an early June low.

German and Finnish law makers vote to approve and back the Spanish bailout a short time ago.  Spain needs 30 billion euro's by the end of this month, only days away, so the vote of approval should help ease tensions. Euro Finance Ministers will provide approval today.  Details are needed, however, to determine how the Spanish bailout is structured. Mass demonstrations are ongoing in Spain as citizens and unions protest austerity. Spanish police fired rubber bullets into a crowd last evening.

The German 2-year is now negative for eleven days in a row. The Belgium 2.42% yield is a record low. The Finland yield has dropped under the U.S. yield making Finland a more attractive investment area than the U.S. Austria yield dropped under 2% this week and France is near 2%. The Portugal 10's and 30's remain inverted and also the 5's to 30's, indicating recessionary times. The Italy yield curve is remaining well-behaved.  The Spain yield curve is experiencing stress.  The difference between the 10's and 30's is now only 15 basis points which hints that an inversion is coming. The Spanish shorter-duration notes, 2's and 5's, are increasing more in relation to the longer-duration bonds, the 2's are up almost 70 basis points since Monday, a huge move, and the 5's are up over 50 basis points since Monday. The Spanish yield curve requires close monitoring in the days ahead.

The Spain-Gemany spread has blown out to 580 (7.01-1.21). Keystone uses 520 and higher as the danger level that verifies ongoing stress and trouble. The record high is around 590 so beads of sweat are appearing on foreheads. The Italy-Germany spread is 477. Keystone uses a spread of 470 and higher to indicate turmoil and stress so both Italy and Spain, especially Spain, are experiencing, and causing, major European stress. Interestingly, the France-Germany spread has dropped to 84 basis points, a low number, well under the 125 level Keystone uses to indicate stress. Germany and France are running the European show and money is flowing into these nations seeking perceived safety. The France 10-year yield has dropped almost 20 basis points since Monday.

Note Added 7/20/12 at 9:00 AM:  The Spain 10-year yield is now at 7.18% gaining 17 basis poitns in the last couple hours. The Spain-Germany spread is now blown out to 597, simply call it 600, "Houston, we have a problem."

Note Added 7/20/12 at 9:24 AM:  The Spain 10-year yield is now 7.24%.  Italy is 6.15%.  Germany 1.17%. The Spain-Gemany spread is now at 607 points. Quick, call an ambulance.