Spanish bond yields have leaked slowly higher all day but the very recent news from Merkel, talking on the G-20, that:
- *MERKEL SAYS WRONG TIME TO DISCUSS POSSIBILITY OF EURO BONDS
- *MERKEL SAYS STATES MUST GIVE UP SOME SOVEREIGNTY TO EU
- *MERKEL SAYS JOINT LIABILITIES IN EUROPE REQUIRE JOINT CONTROLS
- *MERKEL SAYS INVESTORS' INTEREST NOT IDENTICAL WITH EUROPE'S (Subordination?)
has pushed Spanish CDS and bonds to they highest closing levels for the year and just shy of intraday post-EU record wides. For context, these are 15 year high yields at 6.67% and while they 'feel' dramatically high, Spanish bond yields were over 12% in 1995 (but the current spread to Bunds is dramatically wider) highlighting why focusing on the spread not the yield is now critical. 5Y CDS are holding above 600bps again (record wides) and 10Y Spanish spreads (over Bunds) are at 527bps - near all-time (pre- and post-Euro) wides. The last two days have seen a dramatic surge of 38bps from Friday's close and 65bps from Monday's open as Goldman's 'long' short-dated Spanish bond [4] bet continues to Corzine the Muppets.
Spanish 10Y yields at 2012 highs
[5]
and longer-term yields are well off record levels...
[6]
but this is because Bunds were far higher in yield then as this chart shows, we are at all-time record high spreads for Spanish debt...
[7]
Chart: Bloomberg