Weekly Eurozone Watch – “Positive Contagion”

Key Data Points
German 10-year Bund 5 bps higher;
France 1 bp wider to the Bund;
Belgium 9 bps tighter;
Ireland 9 bps tighter;
Italy 13 bps tighter;
Spain 17 bps tighter;
Portugal 12 bps tighter;
Greece 50 bps wider;
Large Eurozone banks up 5-12 percent;
Euro$ up 2.11 percent.


– Ireland, Italy, and Portugal bond yields fall to post-Eurozone debt crisis lows;
Ireland sold €2.5 billion of  5-year bonds at 3.35 percent;
Italy sold €3.5 billion 3-year bonds at 1.85 percent;
Spain sold €5.8 billion of two-, five-, and 13-year bonds at yields of 2.587, 4.03 and 5.57 percent, respectively.  The auction was strongly oversubscribed;
– The ECB left  interest rates unchanged;
Greece’s unemployment rate  soared to 26.8 percent—the highest rate ever recorded in the European Union;
Moody’s slashed Cyprus’ credit rating three notches to Caa3 as negotiations over the €17  billion aid package remains deadlocked and banking systems remains under heavy pressure.

…let’s not forget about one thing. We speak a lot about contagion when things go poorly, but I believe that there is also contagion, positive contagion, when things go well. And I think this is in play now. There is positive contagion.

Mario Draghi,  ECB President

Jan11_EZ_Yield Converge

(click here if chart is not observable)

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