Great Graphic: Euro Area Sovereign Bond Spreads

Here is a Great Graphic from the blog Global Macro Monitor that provides a useful visual of the change in the sovereign 10-year spreads in Europe over the past week to the left and year-to-date below.  

Some may be surprised that only Spain pays a larger premium over Germany compared to the end of last year.  This  reflects heightened concern that Spain will need a larger aide package and that private sector subordinate creditors of the troubled banks will be subject to haircuts.

The pressure on Greece over the past week is function of heightened concerns that the Troika will be unable to approve the next tranche of aid due to the lack of sufficient implementation of past agreements.  There is also the fear that a Greek exit could still very well be in the cards given the ECB's refusal to accept Greek government bonds and government guaranteed instruments as collateral.

The out performance by France and Belgium reflects investors search for yield and willingness to move outside the FANG (Finland, Austria, Netherlands and Germany) to secure it. 
The premium Portugal,  Ireland and  Greece pay over Germany compared with the end of last year has fallen considerably.  It appears to be more a reflection of the past over-shoot than an indication of investor confidence.  For example, most signs suggest Portugal will not be able to return to the capital markets in H2 next year as has been planned, which may mean a second aid package may be necessary. 
Great Graphic: Euro Area Sovereign Bond Spreads Great Graphic:  Euro Area Sovereign Bond Spreads Reviewed by Marc Chandler on July 22, 2012 Rating: 5
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