Nature abhors a vacuum. I don’t think Germany set out to take control of Europe via the EU, but signs are pretty clear the Germans are the only adults in the room.<\/p>\n
All of the EU countries sell bonds that are denominated in Euros, but are the debts of the individual countries – the mortal wound to the EU. The 10 year bond is the benchmark – since they are all in Euros, differences in the rate are almost entirely the perceived risk of default.<\/p>\n
The implied inteest rate for Greek debt is over 25%. A 1000 Euro Greek bond is selling for 284.3 Euros – less than the 50 or 60% “haircut” banks have been told is their “voluntary” contribution. Should it not be “voluntary”, folks who sold Credit Default Swaps against Greek Debt will have to “make good” the entire face value of the bond.<\/p>\n
Italy went over the cliff today. The Italian bond zoomed up 49 basis points in a day (or lost 3% of the value in one day. Despite the magnificant victory in Libya, the government of Italy dissolved without as much as a whimper.<\/p>\n
Spain is only a few days behind and France is starting its slide<\/p>\n
Meanwhile, German debt dropped to 1.72%, 29 basis points less than the 2.01% for the brand new US Treasury notes auctioned yesterday.<\/p>\n
Germany holds the future of Europe in its hands, whether they wanted it or not.<\/p>\n","protected":false},"excerpt":{"rendered":"
Nature abhors a vacuum. I don’t think Germany set out to take control of Europe via the EU, but signs are pretty clear the Germans are the only adults in the room. All of the EU countries sell bonds that … Continue reading