Friday, June 24, 2011

10 Year Italian-German Bund Yield Spread Makes New High; Watching Spain (Chart)

Italy - Germany 10Y Spread (Bloomberg)
After Moody's put "Italy's Aa2 ratings on review for possible downgrade",  I charted out Italy's 10-year bond yield and randomly opened up a chart of the 10 Year Italian-German bond yield spread (ITAGER10:IND) on Sunday 6/17/2011, and it appeared to me that the spread wanted to test the high on 1/10/2011 (1.97) and potentially make a new four year high. I told my twitter followers to watch it on Sunday night. During the next four days the spread went from 1.88 to 2.07 and made a new high. The 5-year Italian-German bund (ITAGER5:IND) spread did not make a new high, but it did spike to test the high on 1/10/2011 (2.17). Thoughts?

The spread measures Italy's credit risk against Germany which is considered the safest credit in the Eurozone. There is an ongoing sovereign debt crisis in Europe with the PIIGS (Portugal, Italy, Ireland, Greece and Spain), so these spreads are important to watch. Today the 10 Year Spanish-German Bund spread (SPAGER10:IND) closed 6 basis points away from the high made on 11/30/2010 (283). The 5 year spread is not on Bloomberg.com. I provide links to more spread quotes on Bloomberg.com in this post.

*This just in:

Moody's Warns On Ratings Of Italian Banks (WSJ)

China Formally Working With IMF To Avoid Eurozone Restructuring - Qu Xing, director of the China Institute of International Studies (Zero Hedge)

China Recognizes Risk Of Buying Euro-Zone Sovereign Debt -China Adviser (Wall Street Journal)

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