Eurozone government bond spreads
Comment of the Day

July 26 2011

Commentary by Eoin Treacy

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.

Back to top