Key Data Points
German 10-year Bund 23 bps higher;
France 8 bps tighter to the Bund;
Ireland 35 bps tighter;
Italy 46 bps tighter;
Spain 43 bps tighter;
Portugal 91 bps tighter;
Greece 88 bps wider;
Large Eurozone banks rise 4.0 to 6.30 percent;
Euro$ down 1.08 percent.

Comments
- Sovereign spreads to the Bund continue to fall sharply;
- European unemployment increase to 20m in the second half of 2013 up from 18.7m in October according to Ernst & Young;
- France’s Constitutional Council struck down and ruled President Hollande’s 75 percent top income tax rate anti-constitutional.

Jan4_Mario Monti

An Irish recovery would provide a boost for Europe and its de facto leader, Angela Merkel, the German chancellor, as much as for Ireland and its prime minister, Enda Kenny. It would show that the controversial treatment of austerity and structural reforms imposed as the price of bail-outs can work. It would reassure the electorates of core Europe, especially German voters who go to the polls in the autumn, that rescues do not condemn them to a never-ending call upon their taxes, as seems to be the case with Greece. And a sustained return by Ireland to the bond markets would boost confidence more generally, helping other bailed-out economies such as Portugal and Spain.

- Economist

WEZ_Spread_WeekWEZ_Bank_WeekWEZ_Spread_YTDWEZ_Bank_YTDWEZ_YieldsWEZ_EuroFX(click here if charts are not observable)

Category: Markets

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2 Responses to “Weekly Eurozone Watch: Spread Compression Continues (1/4/12)”

  1. pdtrader says:

    Pardon my French, but this is just fucking insane. Central banks are squeezing the risk premium out of every conceivable market. The result is that traders & investors are essentially being forced into riskier assets, just to gain a modicum of yield.

    But with the pricing of higher-risk assets being squeezed both by spread compression and the sheer volume of trades going into these markets, the price of risk is becoming crazy dangerous. What happens if yields steepen again? (Or should I say “when” they steepen again?) The liquidation across all markets will, once again, be scary.’

    Astounding to me how little central banks understand about the market’s price mechanisms.

  2. philipat says:

    Weekly US Watch:

    1. Fed Minutes obfuscate manipulation of PM’s by pretending that QE4 may end before 2015.

    2. Unemployment rate rises to 7.8% (They can’t have it both ways!!)

    3. US solves all its defecit problems by minting a 1 Trillion Dollar Platinum coin.

    ALice in Wonderland on both sides of the Pond??