Tainted Alpha

Spain 10 year government bond spread vs. it’s German peer reached new high of 255 bps. Irish bond spread reached record high of 654 bps.

Markets have lost faith in EU bailout plan and are now finding out (again) that math is quite exact science. CNBC Europe has even sent it’s anchor to Lisbon to provide live coverage of Portugal bailout; they were wrong: the markets skipped Portugal and moved to big story – Spain. Spain has a funding requirement of at least €155bn in 2010. Looks intimidating, especially if we took to account the fact that Ireland was pre-funded for the first half of the 2011 and despite that needed a bailout.

This puts the markets near the point where the only solution is the Ben Bernanke way – buy worthless paper and stuff cash in monetary system. I would do it fast, but I doubt on EU leadership determination.  In any case, more the ECB waits the situation will get worse.

Chart 1. Spain vs. Germany 10 Year Government Bond Yield Spread

Chart 2. Ireland vs. Germany 10 Year Government Bond Yield Spread

Chart 3. Portugal vs. Germany 10 Year Government Bond Yield Spread

Chart 4. Greece vs. Germany 10 Year Government Bond Yield Spread

ECB, Euro, Greece, Ireland, Italy, PIIGS, Portugal, Spain

This entry was posted on Friday, November 26th, 2010 at 6:39 am and is filed under Markets. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.