European Bond Yield Summary 8/16/12

10-Year Yields:
Greece 24.61%
Portugal 9.88%
Spain 6.66%
Italy 5.82%

Belgium 2.61%
France 2.16%
Austria 1.99%
Netherlands 1.87%
U.S. 1.82%
U.K. 1.69%
Finland 1.66%
Germany 1.55%

Spain 2-Year Yield 4.23%
Spain 5-Year Yield 5.76%
Spain 10-Year Yield 6.66%
Spain 30-Year Yield 7.11%
2-10 Spread = 243

Italy 2-Year Yield 3.35%
Italy 5-Year Yield 4.90%
Italy 10-Year Yield 5.82%
Italy 30-Year Yield 6.32%
2-10 Spread = 247

Over the last couple weeks, yields for the worrisome nations dropped while yields for the perceived safer havens have all moved higher. Portugal is under 10%, a level not seen in many months. Spain is sporting the infamous '666' this  morning but it is well under the danger level at 7% and higher. Likewise, Italy is at 5.82% now eighteen bips under the 6% danger level. For the perceived safer havens, Austria is about to move up over 2%. The U.K. Finland and Germany are all perceived to be more attractive than U.S. debt. In fact, the Netherlands yield may drop under the U.S. yield. The Spain-Germany spread remains elevated at 513. Keystone uses a 520 and higher spread to indicate major turmoil so Europe has calmed over the last couple weeks. The interesting spread is U.S.-Germany, now at 27. The up in U.S. yield is creating the stronger separation between these two strong nations.

For the Spain yield curve, the 2-10 spread is over 240 which creates enough steepness to keep bankers content. The yield curve is flattening if the spread would drop under 200. Likewise, Italy's yield curve is in better shape for the bankers in recent days.

Soothing central banker words and Draghi's promises have succeeded in providing  a temporary calm to the European debt crisis. Those words must be backed by action, however. The markets will not wait long.  September is key since Chairman Bernenake may make a statement from Jackson Hole on 8/31/12, then the ECB meeting occurs as well as the German ESM vote and other drama. European inflation numbers are flatish so this opens the door for the ECB to more easily act with stimulus. China's Wen says this morning that easing inflation in China allows more room to move with easing measures. Merkel is in Canada meeting with Harper.

Watch the U.S. 10-year yield; moving up 40 basis points in the last three weeks, a phenomenal move. The money out of bonds, however, does not appear to be moving into stocks, at least over the last few days. Perhaps traders are pumped up over slightly positive retail sales and other encouraging data.  Keep your ears open for Spain asking formally for a bailout which will dramatically effect markets. Draghi vowed to support the euro moving forward which moved Spain and Italy yields lower. The German ESM vote in September is critical. If Draghi cannot or does not back up his talk with action, the recent moves will unwind.