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Spanish 10 year bond yields fall below US bonds

Jun 9, 2014 at 10:25 am in Market Commentary by contrarianuk

USA 10-year T Bond

Spanish 10 Year Yields

Today Spanish 10 year bond yields went below US 10 year Treasury bond yields. In early 2012, Spanish bonds traded with a 6% premium to US bonds (8.5% vs 2.5%), that’s one hell of a reversal! Has the Spanish economy really sorted itself out to this extent over the last 2 years? Credit default swap rates are still much higher for Spanish debt than American debt indicating that investors do not believe that investing in Spanish bonds is less risky but the diminishing yields on bonds in Europe is a symptom of the broader economic situation.

Yields have been dropping as eurozone inflation has reduced  significantly in the last few months and then the European Central Bank has cut rates causing a further push into riskier debt. Borrowing costs for countries like Spain, Italy and Ireland have come down as the fear of deflation grows and strong economic growth still looks elusive.

Contrarian Investor UK

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