European Bond Yield Summary 7/23/12; Spain 10-Year Blows Out Above 7.50%

The wheels fell off the cart overnight. China says growth may slow to the sub 7.4% area, below their own 7.5% targeted rate for this year, so miners and basic materials are selling off as well as Asian and Australian markets. This news dropped futures markets last evening. Germany's Roesler says he is 'highly skeptical' that Greece can remain in the euro. In addition, a Der Spiegel article says that the IMF will no longer provide funding to Greece. This news placed futures markets firmly on the red side.

After European markets opened, the euro dropped under the 1.21 level briefly, an 11-year low. Despite Euro Finance Ministers approving the Spanish bank rescue plan on Friday, Spain yields are blowing out to the upside, above 7.5%, now above the previous euro-era record at 7.29% signifying major trouble. Obviously, a full blown Spain sovereign bailout is now needed; the game-playing and inaction by Euro leaders is now leading the continent to potential catastrophic collapse. The Spanish equities market is down over 3.5%. Every market in Europe is down. The Italy 10-year yield is now blown out well above 6% approaching the 6.5% level which signals that Italy's wheels are falling off as well. The Germany 10-year drops to 1.14% a hair away from the previous low record.  The U.K. and U.S. (1.4094% low print overnight) are at record low yields. The spreads are blowing out signaling European turmoil.

10-Year Yields:
Greece 26.14%
Portugal 10.74%
Spain 7.56%
Italy 6.41%
Belgium 2.53%
France 2.12%
Austria 1.93%

Netherlands 1.58%
Finland 1.38%
U.K. 1.45%
U.S. 1.41%
Germany 1.14%

France-Germany Spread 98
Spain-Germany Spread 642
Italy-Germany Spread 527
U.S.-Germany Spread 27

Spain 2-Year Yield 6.51%
Spain 5-Year Yield 7.33%
Spain 10-Year Yield 7.56%
Spain 30-Year Yield 7.53%

Italy 2-Year Yield 4.76%
Italy 5-Year Yield 5.97%
Italy 10-Year Yield 6.41%
Italy 30-Year Yield 6.79%

The first grouping above shows bonds selling off (lower prices, higher yields).  The recent downgrades to Austria places it in the upper grouping. The lower yields in France in recent days has now reversed; France yield is up seven basis points from Friday.  Spain is blown out over 7.5% and Italy is approaching 6.5% as mentioned above. Italian banks are down in excess of 5% with trading suspended for select banks to provide time to bring calm to markets. Finland yields are now under the U.S. and U.K.  The France-Germany spread wil lincrease if the France yield now continues higher.  The Spain-Germany spread is blown out to 642 points, a euro-era record high. The Italy-Germany spread is blown out to 527 points. Note that the Spanish 10-year yield has inverted above the 30-year yield verifying that Spain is in recession and the wheels have fallen off the cart. The Spanish short-duration notes are up120 basis points and 90 basis points for the 2-year and 5-year, respectively, since Friday; the Spanish 5-year is now only 30 bips away from inverting against the 10's and 30's. France sees its short-duration notes climbing as well and on the long end, the 10's and 30's are now only 38 bips away from inverting.

The Troika meets tomorrow to discuss Greece and other headaches and Merkel (Germany) now says she will not supply additional aid to Greece, which throws gasoline on this morning's fire.  The Spanish GDP is released showing further weakness which verifies recession just as the move towards yield curve inversion shows. Europe is a mess, and along with China woes, add up to a global economic environment under serious stress currently. Hang on to your hat, and your wallet.

Note Added 7/23/12 at 6:11 AM EST:  The German 10-year yield is now printing 1.13%. The S&P futures are now down 17.

Note Added 7/23/12 at 7:13 AM EST:  The U.S. 10-year yield drops under 1.40% to 1.3993% firmly establishing deflationary times going forward. Egan-Jones rating agency downgrades Spain. Copper is takin' the pipe, down almost 3%. The S&P futures are now down 14.