Market Overview

CREDIT SPREADS IN EUROPE CONTINUE TO WIDEN

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The Euro crisis is the crisis that keeps on giving.  While U.S. equities soar 9% in as many days the problems in Europe appear far from resolved. Today’s ZEW survey sparked some fears over lower Germany economic growth.  Gavin Nolan of Markit detailed the move across Europe this afternoon:

“Sovereigns continued to underperform in a nervous market. The Markit SovX Western Europe index is now almost 50bp wider than the Markit iTraxx Europe, the widest difference on record. As usual, the SovX was driven by the peripherals, which were significantly wider across the  board. Unusually, however, Greece’s spreads held up well compared to its peers. The country successfully sold EUR1.17 billion of six-month treasury bills with a bid-to-cover
ratio of 4.54, an improvement from the last auction in July. The yield was slightly higher but this was to be expected given the widening in spreads over the summer.”

piigs CREDIT SPREADS IN EUROPE CONTINUE TO WIDEN

Investors appear to be getting used to the consistent deterioration in many European markets.  With the persistent rise in bond yields and in credit spreads it looks to me like the market is forcing the EMU’s hand little by little.  When this comes to a head the global economy will most certainly be paying attention.

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