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
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.
by contrarianuk
Spanish 10 year bond yields fall below US bonds
Jun 9, 2014 at 10:25 am in Market Commentary by contrarianuk
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
IMPORTANT: The posts I make are in no way meant as investment suggestions or recommendations to any visitors to the site. They are simply my views, personal reflections and analysis on the markets. Anyone who wishes to spread bet or buy stocks should rely on their own due diligence and common sense before placing any spread trade.