Eurozone government bond spreads
Eoin Treacy's view I have posted
the relevant government bonds spreads for various troubled Eurozone countries
on a number of occasions over the last year, most recently on July
18th. I thought it might be useful for subscribers to have easy access to
these spreads and have added them to the Spreads and Overlays section of the
Chart Library.
Following a swift pullback on Friday, spreads for both Spain
and Italy have rallied once more and
are now testing their highs. The Eurozone bailout deal agreed on Thursday has
probably bought some additional time for the currency union. However, it is
unlikely that investors will ever again accept the proposition that Italy's
credit is on an equal footing with that of Germany. A return to pre-convergence
wides of 500 basis points for Italy and 400 for Spain remain a distinct medium-term
possibility for as long as the three-year progressions of rising lows remain
intact.
At present,
the US Dollar's woes have become the focus of investor ire with the currency
falling against just about everything. However, the Eurozone's problems have
not been solved. Fiscal cohesion remains a very long-term ambition and private
participation in the programme remains voluntary rather than obligatory.