European Bond Spreads Show ECB Losing the Containment War on Italian Bond Yields

Curve Watchers Anonymous is taking a look at 10-year bond yields and bond spreads in the Eurozone.

Interest on 10-Year bonds in Italy are down from the spike high after the ECB stepped in with purchases as shown in the following chart. However, the chart also shows rates have inched back up and have now taken back about half of the ECBs effort.

Italy 10-Year Government Bonds



Spreads vs. Germany are another way of looking at things.

Here is a table I put together with data from Bloomberg as of Sunday evening.

Country	10-Yr Yield	Spread vs. Germany
Germany	1.77	0.00
France	2.48	0.71
Belgium	3.90	2.13
Spain	5.16	3.39
Italy	5.41	3.64
Ireland	8.64	6.87
Portugal	11.14	9.37
Greece	20.55	18.78

While some countries have gotten much tighter (notably Ireland), others have gotten worse, notably France.

I asked Chris Puplava at Financial Sense if he could chart that idea over time. Greece is so far removed for other countries and it so distorted the charts we removed it.

10-Year Government Bond Spreads vs. Germany



On a spread-basis, the only country whose yields have collapsed is Ireland.

Italy, Belgium, France and Spain are at or close to spread highs. Also note how France is creeping up.

1-Year Government Bond Spreads vs. Germany



Portugal does not have a 1-year symbol so the math is not on a consistent basis with the others.

On 1-year spreads, Italy, Spain, and Belgium are at new highs, suggesting the ECB is losing the containment war on Italian bond yields.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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