Although European stock markets all traded off into their close, southern European sovereign debt all closed at or near their highs of the day. Coincident with the bounce in the euro, the drop in yields follow the ECB credit facility that saw less than expected borrowing, some beginning of the Q buying in response to the sharp spike in yields over the past few weeks and the belief that the market demand for budget/debt discipline is being heeded notwithstanding the short term (1-2 yrs) economic pain that may result. Also, while it may end up being famous last words, an EC spokesman reiterated that there will be “no restructuring of debt for Greece or any other member state.” 2 yr yields in Greece are lower by 38 bps, Portugal by 18 bps, Ireland by 6 bps and Spain by 5 bps. Out 10 yrs, the Greek yield is lower by 7 bps, Portugal by 25 bps, Ireland by 17 bps and Spain by 5 bps. 5 yr CDS in all of the above are also trading tighter.
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