Spot the odd sovereign out in these eurozone bond yield spread data on Friday.
Flashes (or should that be éclats?) via Reuters:
RTRS-SPANISH/GERMAN 10-YEAR GOVERNMENT BOND YIELD SPREAD AT EURO LIFETIME HIGH OF 192 BPS
RTRS-ITALIAN/GERMAN 10-YEAR GOVERNMENT BOND YIELD SPREAD AT 168 BPS, HIGHEST SINCE JAN 2009 – REUTERS DATA
RTRS-FRENCH/GERMAN 10-YEAR GOVERNMENT BOND YIELD SPREAD AT 39 BPS, HIGHEST SINCE MAY 2009 – REUTRS DATA
A 39 basis point spread doesn’t really have a patch on that between bonos (or BTPs) and bunds, but any indication of contagion to Europe’s core is worth following up.
For example, Baseline Scenario’s Peter Boone and Simon Johnson are pessimists:
But who is really safe in Europe? With France running an 8% GDP budget deficit (for 2010) and a debt/GDP ratio of 83.6%, should we be confident they are safe while Spain is not (with debt/GDP at 65%)? France’s thirty years of budget deficits do not bode well for anyone expecting an immediate strong fiscal response. In many ways Spain appears better placed to take tough actions than France.
Well, France isn’t staring at a veritable Depression-sized unemployment problem, nor does it face Spain’s private indebtedness. Sovereign crises don’t hinge on debt per GDP alone either, as Paul Kedrosky reminds. Of course, French banks do have an inconveniently high exposure to weaker eurozone sovereigns, on the other side of the ledger.
Not that bankers in La perfide Albion should gloat, as a wealth management note from BNP Paribas pointed out on Thursday:
Core contagion — something to surveiller, in short. Whereas the bond action on Spanish and Italian debt is starting to look like a grim spot of rubber-necking.
Related links:
Le SMP, le bailout Français – FT Alphaville
Greece and French banks: pas de problème — d’accord? - FT Alphaville
Who’s most at risk of falling into a European debt trap – FT Alphaville
Snarky quote du jour, eurotrash edition – FT Alphaville