Key Data Points
German 10-year bund 11 bps higher;
Italy 10-year 23 bps tighter to the Bund;
Spain 56 bps tighter;
Portugal 33 bps tighter;
Greece 9 bps tighter;
Large Eurozone banks continue to run, up 3-9 percent for the week;
Euro$ up 0.20 percent.
Comment
Merkel returns from holiday and backs ECB’s Draghi on Spain and Italy. At least that’s the market perception. Our sense is the debate will be over hard or soft conditionality, which will have political blowback in both the north and south.
Speaking late Thursday at a news conference in Ottawa with Stephen Harper, the Canadian prime minister, Ms. Merkel backed a statement by Mario Draghi, the president of the E.C.B., that the bank would do whatever it took to preserve the euro.
In contrast to some members of the German Parliament, Ms. Merkel expressed no objections to plans by the E.C.B. to buy bonds to hold down borrowing costs for stricken countries, if certain conditions were met.
– NY Times
Note the significant tightening to the bund in all countries x/ Spain for the year.
(click here if charts are not observable)
